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entitled 'Federal Contracting: OMB's Acquisition Savings Initiative
Had Results, but Improvements Needed' which was released on November
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United States Government Accountability Office:
GAO:
Report to Congressional Requesters:
November 2011:
Federal Contracting:
OMB's Acquisition Savings Initiative Had Results, but Improvements
Needed:
GAO-12-57:
GAO Highlights:
Highlights of GAO-12-57, a report to congressional requesters.
Why GAO Did This Study:
In 2009, President Obama directed the Office of Management and Budget
(OMB) to provide guidance to the 24 largest agencies to save $40
billion annually in contracting by fiscal year 2011 and reduce the
share of dollars obligated under new high-risk contracts by 10 percent
in fiscal year 2010. Agencies were to submit plans for meeting these
goals to OMB’s Office of Federal Procurement Policy (OFPP), which
implemented the initiative. GAO was asked to assess (1) the extent to
which the OMB initiative yielded the intended savings from
contracting, (2) how effectively agencies reduced obligations on new
high-risk contracts, and (3) the savings and risk reduction strategies
to identify those that have the potential to yield long-term savings
or improve acquisition outcomes. GAO reviewed agencies’ savings and
risk reduction plans and agency-reported data, and met with OFPP and
senior procurement officials at each agency.
What GAO Found:
While agencies reported substantial savings, GAO found problems with
the reported data and identified missed opportunities to further
reduce high-risk contracts. Nevertheless, the initiative has prompted
agencies to take actions to identify potential contract savings and
reduce contracting risks.
The extent of savings resulting from OMB’s initiative is unclear.
While OMB reported that agencies reduced contract spending by $15
billion from fiscal year 2009 to fiscal year 2010, this analysis was
based on governmentwide spending trends and not solely due to the
savings initiative. GAO found billions of dollars in overstated and
questionable savings, reported by civilian agencies in early fiscal
year 2011. For example, one agency reported about $1.9 billion in
savings that represented total contract obligations rather than
savings, while the National Aeronautics and Space Administration
reported $660 million in savings resulting from a 2004 decision to
retire the Space Shuttle. Further, the Defense Department’s 2010
savings, reported in August 2011, stemmed from a broader, ongoing
effort to reduce the department’s budget—and were not necessarily tied
to contract savings. GAO also found that agency officials were
confused about what constitutes a savings due to OMB’s broad and
changing guidance, and whether the savings initiative would continue
in future years. In July 2011, OMB introduced an initiative to reduce
spending on professional and management services contracts, but it is
unclear how this effort will affect the savings initiative.
Although OMB has not reported on the overall results of efforts to
reduce the use of new high-risk contracts, GAO found that in fiscal
year 2010, agencies decreased use of those contracts, as a share of
base spending, by less than 1 percent—well short of the 10 percent
goal. OMB did report on results of individual categories of newly
awarded high-risk contracts—noncompetitive, competitive solicitations
receiving only one offer, cost-reimbursement, and time-and-materials
contracts—but GAO’s analysis yielded different results. Variations in
results were primarily due to differences in the methodologies used by
GAO and OFPP on how certain contracts were allocated to the individual
high-risk categories, and an adjustment GAO made for one large
contract that an agency incorrectly coded as being high-risk. Further,
OFPP’s focus on only new high-risk contracts limited the potential for
greater risk reduction. When all high-risk obligations are taken into
account, such as for orders under noncompeted blanket purchase
agreements and certain task orders, there was nearly a 2 percent
increase in the share of high-risk spending from fiscal year 2009 to
2010.
Agencies did use OMB’s initiative to garner support from agency
leadership to review contracts for cost and risk reduction
opportunities. GAO identified many acquisition savings and risk
reduction strategies that agencies used—-such as improved planning,
strengthening the workforce, and streamlining processes-—that show
promise in yielding long-term savings or improved acquisition
outcomes. For example, one agency reported saving nearly $350 million
by leveraging its buying power when purchasing office supplies,
software licenses, and other items. Others reported savings by hiring
experienced cost and price analysts or training existing personnel in
these skills, seeking discounts under blanket purchase agreements, and
using online tools to promote competition.
What GAO Recommends:
GAO recommends that OMB continue to focus on the savings initiative
and clarify how it aligns with other new initiatives, clarify guidance
on how agencies’ initiatives are defined and reported, and expand the
initiative to include all high-risk actions. GAO also recommends that
OMB report on the results of the initiative through fiscal year 2011.
OFPP expressed concern that the report presents an incomplete picture
of savings, especially at DOD. GAO disagrees and believes the report
accurately portrays the scope and results of agencies’ efforts under
the initiative. OFPP agreed to adopt, where appropriate, GAO’s
recommendations regarding recording and methodological concerns.
View [hyperlink, http://www.gao.gov/products/GAO-12-57]. For more
information, contact John P. Hutton at (202) 512-4841 or
huttonj@gao.gov.
[End of section]
Contents:
Letter:
Background:
Total Results of OMB's Initiative Uncertain Due to Unclear Guidance
and Data Discrepancies:
Agencies Have Slightly Decreased Use of New High-Risk Contracts, but
OFPP's Approach Limited the Full Potential of Agencies' Efforts:
Agencies Are Employing a Variety of Acquisition Savings Strategies to
Achieve Long-Term Savings and Improve Outcomes:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Summary of the 24 CFO Act Agencies' Unadjusted and
Adjusted Savings Baselines and Associated Fiscal Year 2010 Savings
Targets:
Appendix III: Comments from the Office of Management and Budget:
Appendix IV: Comments from the Department of Defense:
Appendix V: Comments from the Department of Homeland Security:
Appendix VI: Comments from the Department of Health and Human Services:
Appendix VII: Comments from the Department of Labor:
Appendix VIII: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Comparison of OMB's High Risk Contract Categories:
Table 2: Office of Federal Procurement Policy's (OFPP) Categories of
Acquisition Savings Strategies:
Table 3: Change in Agencies' Obligations for New High-Risk Contracts
for Fiscal Year 2010 When Compared to Fiscal Year 2009 Obligation Data:
Figures:
Figure 1: Obligations Made by the 24 CFO Act Agencies in Fiscal Year
2010 (in billions):
Figure 2: Effect of Including all High Risk Obligations When
Determining the Change in Fiscal Year 2010 Obligations as a Share of
Base Spending from Fiscal Year 2009:
Figure 3: Comparison of Forward and Reverse Auction Processes:
Abbreviations:
BPA: Blanket Purchase Agreement:
CAO: Chief Acquisition Officer:
CFO: Chief Financial Officer:
DHS: Department of Homeland Security:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
FPDS-NG: Federal Procurement Data System - Next Generation:
GSA: General Services Administration:
HHS: Department of Health and Human Services:
IT: Information Technology:
MAX: MAX Information System:
NASA: National Aeronautics and Space Administration:
OFPP: Office of Federal Procurement Policy:
OMB: Office of Management and Budget:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 15, 2011:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Scott P. Brown
Ranking Member:
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
As the United States faces rapidly building fiscal pressures, there is
widespread agreement on the urgent need to look at steps that can
begin to change our long-term fiscal path. Addressing these fiscal
challenges will require action on several fronts, and potentially
large reductions in spending. With the federal government obligating
hundreds of billions of dollars in contracts for goods and services
each year--about $537 billion in fiscal year 2010--agencies are being
asked to buy smarter and to do more with less. Thus, the potential for
savings through contracting has been a key area of focus. In March
2009, the Obama administration directed the Office of Management and
Budget (OMB) to develop governmentwide guidance to assist agencies in
identifying contracts that are wasteful or inefficient and to
formulate appropriate corrective action in a timely manner.
Subsequently, OMB undertook a comprehensive effort to reform
government contracting, including a goal of saving $40 billion
annually by the end of fiscal year 2011. OMB also directed agencies to
reduce the share of their obligations through new contracts in fiscal
year 2010 by 10 percent in certain high-risk categories, such as
noncompetitive awards and cost-reimbursement contracts. The 24
agencies subject to the Chief Financial Officers (CFO) Act were
directed to submit acquisition savings plans to the Office of Federal
Procurement Policy (OFPP)--the office within OMB assigned to manage
and oversee the implementation of the initiative--outlining the
actions they planned to take.
With the completion of fiscal year 2011, the acquisition savings and
high-risk contract reduction initiative has passed a milestone date;
the time frame by which agencies were directed to reduce contracting
by $40 billion annually and limit the use of risky contracting
practices. You requested that we review the status of the
administration's acquisition savings and high-risk contract reduction
goals and identify strategies agencies implemented that may show
potential for being leveraged across government. Accordingly, we
assessed: (1) the extent to which OMB's initiative has achieved the
intended savings from contracting, (2) the effectiveness of OMB's
initiative to reduce obligations on new high-risk contract awards as a
share of base spending by 10 percent, and (3) the acquisition savings
and risk reduction strategies to identify those with the potential to
yield long-term savings or improve acquisition outcomes.
We used the following methodologies to develop our findings:
* To assess the extent to which OMB's initiative achieved the intended
savings, we reviewed agencies' acquisition savings plans and met with
senior procurement officials at each of the 24 participating agencies
to obtain greater insight into their respective plans. We also
reviewed OMB and OFPP documents regarding this and other acquisition
reform initiatives, obtained fiscal year 2010 and 2011 cost savings
data from OMB's MAX Information System (MAX), and met with OFPP
officials to discuss their management and oversight of the initiative.
[Footnote 1] We analyzed the MAX data to determine agencies' estimated
and reported savings and identified numerous issues affecting its
quality. As a result, we believe the savings totals in MAX do not
provide an accurate representation of the savings agencies achieved
under this initiative.
* To assess the extent to which federal agencies reduced the share of
dollars obligated on new high-risk contracts, we reviewed OMB and OFPP
documents and met with senior procurement officials at each agency and
with OFPP. We also analyzed obligation data from the federal
government's procurement database--the Federal Procurement Data System
- Next Generation (FPDS-NG)--for fiscal years 2009 and 2010 and
applied OFPP's methodology for calculating the results of this
initiative. Though we have previously reported on issues with FPDS-
NG's reliability, we have found the system to be sufficiently reliable
for general overall trends and gaining additional insight into high-
risk contracting. We also reviewed prior GAO reports and recent
statutory and regulatory actions pertaining to high-risk contracts and
competition.
* To identify acquisition savings and risk reduction strategies that
showed promise in yielding long-term savings or improving acquisition
outcomes, we reviewed prior GAO reports and associated
recommendations, met with OFPP and procurement officials at each
agency, analyzed agency acquisition savings plans and OFPP progress
reports on savings initiatives, and reviewed reported savings data in
MAX that were provided by OFPP. Using a nongeneralizable sampling
approach, we selected 27 out of the more than 800 initiatives
contained in MAX, as of January 2011, for further analysis. We
determined that these initiatives demonstrated beneficial acquisition
practices identified in prior GAO work, led to reported savings, or
had the potential for widespread application across the government.
Furthermore, the set of initiatives we selected contained a variety of
savings strategies from multiple agencies. We asked the agency
officials responsible for the initiatives about the development,
implementation, and tracking of their activities and assessed their
responses. As part of our review, we identified notable examples of
good procurement practices included in this initiative. We also
identified other notable examples of good procurement practices based
on our conversations with procurement officials and our analysis of
information contained in MAX. We did not independently validate the
agency-reported savings.
A more detailed description of our scope and methodology is presented
in appendix I. We conducted this performance audit from December 2010
to November 2011 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
Background:
OMB's July 2009 guidance to the 24 CFO Act agencies--which
collectively account for about 98 percent of all federal spending--
established specific acquisition savings targets for fiscal years 2010
and 2011 that would help meet the administration's annual $40 billion
net savings goal.[Footnote 2] Agencies were given specific targets to
reduce contract obligations by 3.5 percent for fiscal year 2010 and a
further 3.5 percent for fiscal year 2011, when compared with fiscal
year 2008 spending levels. OMB provided agencies with two general
approaches on how to do this: (1) actions directly reducing spending
as a result of decisions made--generally at the program or project
level, and (2) actions creating savings through more effective
acquisition practices. Agencies were also encouraged to pursue other
actions as needed to achieve the respective savings targets.
Additional guidance provided to agencies in September 2009 clarified
the concept of acquisition savings to also include cost avoidance. The
guidance noted that for each agency initiative, savings should be
established by explaining the difference between what would have been
spent in the absence of the initiative and what the agency expected to
spend as a result of implementing the initiative.
OMB's July 2009 guidance also set a goal for agencies to reduce the
share of dollars obligated on new high-risk contracts. Using fiscal
year 2008 obligation data obtained from FPDS-NG as a baseline, OMB
directed agencies to take actions to reduce by 10 percent the combined
share of dollars obligated in fiscal year 2010 on:
1. contracts awarded noncompetitively,
2. contracts receiving only one offer in response to a competitive
solicitation,
3. time-and-materials contracts,[Footnote 3] and:
4. cost-reimbursement type contracts.
Additional information on each high-risk contract category is provided
in table 1.
Table 1: Comparison of OMB's High-Risk Contract Categories:
Contract awards: Noncompetitive contract awards: Government awards
contract without using full and open competitive procedures. (Laws and
regulations permit agencies to use noncompetitive procedures, if
adequately justified, such as for an urgent and compelling need or
under certain small-businesses procedures);
Contract awards: Competitive solicitations awarded after receiving
only one offer: Government conducts full and open competitive
procurement in accordance with federal acquisition regulations, but
receives only one offer. (Laws and regulations do not require agencies
to assess the circumstances that led to only one offer being received);
Contract types: Time-and-materials: Government pays fixed per-hour
labor rates that include wages, overhead, general and administrative
costs, and profit; government may reimburse contractor for other
direct costs, such as travel and materials costs. Government is not
guaranteed a completed end item or service within the ceiling price;
Contractor makes good faith effort to meet government's needs within
the ceiling price;
Contract types: Cost-reimbursement: Government pays contractor's
allowable incurred costs, which do not include profit. Also may pay a
fee, which may be related to performance. Government is not guaranteed
a completed end item or service within the estimated cost;
Contractor makes good faith effort to meet government's needs within
the estimated cost and ceiling.
Contract awards: Noncompetitive contract awards: Where is the risk?
Government must negotiate contracts without the benefit of a direct
market mechanism to help establish pricing;
Contract awards: Competitive solicitations awarded after receiving
only one offer: Where is the risk? Government loses the ability to
consider alternative solutions in a reasoned and structured manner;
Contract types: Time-and-materials: Who assumes risk of cost overrun?
Government; Where is the risk? Contract type provides limited direct
incentive to control costs;
Contract types: Cost-reimbursement: Who assumes risk of cost overrun?
Government; Where is the risk? Contract type provides limited direct
incentive to control costs.
Sources GAO analysis of OMB and DOD data.
Note: Data are from the Federal Acquisition Regulation, Defense
Federal Acquisition Regulation Supplement, and DOD's Contract Pricing
Preference Guide.
[End of table]
Agencies were instructed to submit their acquisition savings and risk
reduction plans to OMB no later than November 2009. Upon receipt of
the plans, OFPP analysts entered the acquisition savings initiative
data into OMB's MAX system and categorized each initiative into 1 of
11 savings strategies developed by OFPP, as shown in table 2.[Footnote
4] OFPP designated MAX as the tracking and reporting system for the
acquisition savings component of the initiative, as well as a means by
which agencies could share information on specific savings strategies
and initiatives. Agency procurement officials were instructed to
periodically update their savings data in MAX and to enter information
on new savings initiatives as appropriate.
Table 2: Office of Federal Procurement Policy's (OFPP) Categories of
Acquisition Savings Strategies:
Savings initiative category: Terminations and Reductions;
Description of category: Initiatives where an agency determined it
could end contracts that are (1) ineffective, (2) wasteful, (3)
supporting programs that are being terminated, reduced, or changed in
scope, or (4) not otherwise likely to meet the agency's needs.
Savings initiative category: Strategic Sourcing;
Description of category: Initiatives where the full or partial use of
the strategic sourcing process is applied for the procurement of
products and/or services.
Savings initiative category: Conversion to Lower-Risk Contract Type;
Description of category: Initiatives that reduce the risk associated
with a contract by using a lower risk contract type, for example by
converting a time-and-materials contract to a cost-reimbursement or
firm fixed-price contract.
Savings initiative category: Negotiating Discounts;
Description of category: Activities involving requests for discounts
on blanket purchase agreements (BPA) or negotiating lower prices or
rates on contracts.
Savings initiative category: e-Procurement Strategies;
Description of category: Initiatives using technology to improve the
procurement process. Examples include the use of online auctions or
electronic bidding.
Savings initiative category: Administrative Efficiencies Using
Technology;
Description of category: Initiatives involving the use of technology
to gain administrative efficiencies in the procurement process.
Savings initiative category: Insourcing;
Description of category: Initiatives involving bringing work in-house
or converting work currently performed by contractors to federal
employees.
Savings initiative category: Conversion to Direct Acquisition;
Description of category: Initiatives aimed at eliminating the
administrative fees associated with the use of another agency contract
by directly contracting for products or services.
Savings initiative category: Other Savings Strategies;
Description of category: Initiatives that do not fall into other
savings categories.
Savings initiative category: Process Review and Improvement;
Description of category: Initiatives involving optimization of the
acquisition process, including any underlying or associated processes,
to achieve more efficient or consistent results.
Savings initiative category: Acquisition Workforce;
Description of category: Initiatives focusing on developing the skills
and capabilities of the acquisition workforce.
Source: OFPP and OMB.
[End of table]
Many of the actions identified in OMB's guidance have been highlighted
in our prior reviews and recommendations. For example:
* In May 2005, OMB directed agencies to implement strategic sourcing
programs as a means of leveraging the government's buying power, due
in part to our prior recommendations that agencies gain knowledge of
their spending habits and take a more strategic approach to
procurement.[Footnote 5]
* In May 2007, OMB provided agencies with guidance on enhancing
competition by evaluating contracting trends and identifying areas
where the acquisition process could be strengthened. We had reported
that the government frequently missed opportunities to take full
advantage of competition when placing orders, for example.[Footnote 6]
* In June 2008, OMB undertook an effort to help agencies make sound
business decisions when using interagency contracts by ensuring
agencies better managed their shared fiduciary responsibilities. GAO
first designated the management of interagency contracting as a high-
risk area in 2005, and our work has shown that to facilitate effective
purchasing and to help obtain best value when buying goods and
services, all parties involved in the use of interagency contracts
should have clearly defined roles and responsibilities.[Footnote 7]
* In July 2009, OMB instructed agencies to conduct internal reviews of
the work professional and management service contractors were
performing to determine whether there was a potential overreliance on
contractors and take actions to ensure balance between public and
private labor resources. We have long reported that the closer
contractor services come to supporting inherently governmental
functions, the greater the risk of contractors influencing the
government's control over, and accountability for, decisions that may
not be in the best interest of the government and the taxpayer.
[Footnote 8]
In parallel with the acquisition savings and high-risk contract
reduction initiative, OMB also directed agencies to reduce their
proposed discretionary spending budgets in fiscal years 2011 and 2012
by 5 percent in each year, when compared to the previous year's budget
levels. Although these efforts focused on agency budget proposals,
there is some linkage with the acquisition savings initiative. In
particular, OMB's budget guidance for fiscal years 2011 and 2012
requested that agencies include, at a minimum, five program
terminations, reductions, or other savings initiatives that would
contribute to reducing agency spending below the previous year's
budget level.
Federal agencies, such as the Departments of Defense (DOD), Homeland
Security (DHS), and Housing and Urban Development, are also
simultaneously undertaking agencywide efficiency initiatives, as we
have recently reported.[Footnote 9] For example, DOD's 2010 efficiency
review, initiated by the former Secretary of Defense, established
substantial cost saving and efficiency goals that are expected to be
achieved by large-scale program changes as well as smaller
administrative changes.[Footnote 10] For some agencies, including DHS,
savings from contracting or reductions in high-risk contracts
resulting from these efficiency initiatives were included in their
savings and risk reduction plans under OMB's savings initiative.
Total Results of OMB's Initiative Uncertain Due to Unclear Guidance
and Data Discrepancies:
Agencies reported substantial savings under the administration's
acquisition savings initiative. However, the extent of actual savings
resulting from the initiative is unclear due to (1) limitations with
OMB's reporting of savings; (2) significant concerns regarding the
completeness, reliability, and accuracy of the data in the system OFPP
used to track and manage the effort; and (3) agency confusion about
the initiative's savings targets. While OMB reported in February 2011
that agencies reduced contract spending, the reported reduction was
based on general obligation trends, and not agencies' reported
acquisition savings under the initiative. We analyzed agencies'
reported savings results in MAX and determined that it is not possible
to accurately determine the results of this initiative, in part
because a significant amount of the savings was based on DOD's
identified savings. DOD's savings were solely attributed to budget
reductions included in an overall effort to reduce spending, and were
not necessarily tied to contract savings. According to senior DOD
officials, OMB supported the department's decision to use a budget-
based approach to this initiative so that reported savings would be
quantifiable and verifiable. Moreover, our analysis of the civilian
agencies' MAX data identified overstated and questionable savings in
the billions of dollars. Further complicating matters, the
implementation of the initiative was hindered by an inconsistent
understanding of savings targets by the agencies, reductions to
agencies' baselines used to determine overall annual acquisition
savings, and widespread variation in how agencies established savings
targets and verified their savings were accurate. Going forward, it is
unclear whether the administration plans to continue to focus on this
acquisition savings initiative.
Reported Results Unclear as OFPP Lacks Complete, Reliable, and
Accurate Data:
OMB's reporting on results of the acquisition savings initiative has
been based on inconsistent data sources and time frames, creating
uncertainty about the actual outcome of agencies' efforts. Throughout
fiscal year 2010, OMB reported that agencies were "on track" to
achieve $19 billion in savings for the year--or about 3.5 percent of
fiscal year 2008 total spending. This anticipated reduction was based
on agencies' estimated savings data in MAX, the designated data source
OFPP used to track results from the savings initiative. OMB reported
in February 2011 that as a result of the administration's mandate to
reduce contract spending by $40 billion annually, the government's
overall obligations had dropped by $15 billion from fiscal year 2009
to 2010. However, the reported reduction in spending was based on
governmentwide FPDS-NG obligations and not the agencies' reported
savings under this initiative. Because FPDS-NG contains general
information on overall procurement trends, it provides no insight into
the extent to which agency actions as a result of the savings
initiative contributed to this reduction. In addition, OMB's February
2011 announcement compared obligations from 2009 to 2010, whereas the
baseline year for the savings initiative was 2008. Our analysis of
FPDS-NG data show that spending in 2008 was comparable to 2010 levels.
Our analysis of the MAX data found that it is not possible to
accurately determine savings resulting from this initiative. One key
reason is that, while the initiative was intended to achieve contract
savings, DOD's approach was strictly budget-driven--stemming from an
ongoing, broader savings and cost-avoidance initiative--and included
all related spending (not necessarily tied to contract savings) within
the respective budget accounts. According to senior DOD acquisition
and budget officials, the department's reported $19.3 billion in
actual savings represented the fiscal year 2010 portion of an overall
$330 billion in spending reductions identified in the department's
Future Years Defense Program through 2015.[Footnote 11] For example,
DOD reported $585 million in fiscal year 2010 savings from terminating
the Presidential Helicopter program, which as we have previously
reported had experienced significant cost increases and schedule
delays.[Footnote 12] In another example, DOD reported $809 million in
savings attributed to a strategic decision to hold the number of Army
brigade combat teams constant rather than increasing them as planned.
Further, although a number of DOD components--including the Army,
Navy, Air Force, and the Defense Logistics Agency--have all
implemented process-related improvements, such as strategic sourcing
initiatives, savings resulting from these activities were absent from
DOD's submission. Senior DOD acquisition officials told us that, while
such efforts are important and continue to have high-level support
within the department, they were deliberately excluded from the
department's savings plan to focus more on initiatives that could be
tied to measurable and verifiable budget reductions. The officials
noted that OMB supported DOD's approach.
We also found other issues with the completeness, reliability, and
accuracy of the civilian agencies' reported fiscal year 2010 savings
from contracting initiatives and their estimated savings for fiscal
year 2011. Although the information in MAX, as of July 2011, showed
that the 23 civilian agencies reported contract savings of $8 billion
in fiscal year 2010, we found billions of dollars in overstated and
questionable savings. Further, even when taking into consideration
data entered into MAX on the civilian agencies' forecasted savings for
fiscal year 2011--about $5.9 billion--and DOD's estimated fiscal year
2011 savings of $11 billion, the 24 agencies are far short of the
administration's $40 billion goal.
Overstated and Questionable Savings:
When we initially analyzed the MAX data, we found significant
overstated savings and other data-entry errors. For example, at least
three agencies entered full contract obligation amounts into MAX
rather than just the amount of savings generated from initiatives
involving those contracts.[Footnote 13] These overstatements accounted
for $1.1 billion in erroneous reported savings for fiscal year 2010.
We also identified duplicate entries totaling over $200 million and
instances where dollar amounts contained multiple decimal points or
were entered in whole dollars rather than in millions of dollars as
OFPP had requested. After we brought these and other data
irregularities to the attention of OFPP officials in March 2011, the
Administrator of OFPP sent a request to the senior procurement
officials at the 24 agencies, asking that they (1) update their
agencies' savings data in MAX and (2) provide assurances that the
reported savings were reasonably determined. While many of the data-
entry errors we identified were corrected as a result, other
inaccuracies remained, and in some instances new problems arose. For
example, although senior procurement officials at the Department of
Health and Human Services (HHS) provided OFPP with assurances that
their savings data were reasonably accurate, we found that an $849
million overstatement that we had previously disclosed to HHS and OFPP
was still in the system as of July 2011. In addition, HHS's update
included roughly $1.0 billion more in reported savings that were full
contract obligations rather than actual savings resulting from the
respective initiatives.
OMB's guidance instructed agencies to achieve acquisition savings by
reducing demand or prices paid, or through more effective practices,
and recognized that the acquisition savings plans would take into
consideration agencies' specific contracting needs and unique
missions. This broad guidance led to inconsistent, and in some
instances, widely disparate interpretations about what constituted
savings from the agencies' contracting initiatives. We identified
billions of dollars in reported actual savings that we consider to be
questionable--based on the overarching principles of this initiative
to reduce contracting inefficiencies and improve acquisition processes
and practices--as illustrated in the following examples:[Footnote 14]
* Savings resulting from program terminations: A number of agencies
relied on program terminations as a way to meet their savings targets,
whereas others did not consider such actions to be a sustainable
source of savings. For example, 95 percent of the National Aeronautics
and Space Administration's (NASA) fiscal year 2010 reported savings of
$697 million involved the scheduled retirement of the Space Shuttle,
which had been planned since January 2004 and was not the result of
this initiative.[Footnote 15] In contrast, senior procurement
officials from the Department of Commerce told us they intentionally
did not include program terminations in their savings plan, as the
agency decided to focus more on longer-term initiatives to promote the
effective execution and administration of contracts rather than
onetime savings associated with terminations.
* Savings from closing out contracts: Some agencies reported
deobligated funds from completed contracts as savings, whereas other
agencies did not consider this routine activity as such.[Footnote 16]
For example, the Department of the Interior (Interior) reported $107
million in savings from funds that were deobligated during the
contract closeout process, representing about 40 percent of the
department's overall reported savings. In contrast, DHS more
appropriately reported only $1.1 million in administrative cost
savings from expediting the contract closeout process and did not
consider deobligation of any remaining funds as savings.
* Savings from the use of interagency contracts: GAO has long reported
on the challenges associated with interagency contracting. In
reviewing agencies' reported savings, we found some instances where
agencies were unsure whether savings resulting from interagency
contracts should be reported by the agency executing the contract
action or by the agency funding the requirement. For example, Interior
reported saving $30 million by contracting on behalf of DOD for a
counseling program. Conversely, the General Services Administration's
(GSA) savings plan did not include any savings that may result from
contracting it performed on behalf of other agencies. Discrepancies
such as these increase the risk of potentially double counting
savings, or not counting savings at all.
* Claiming savings from contractor pension contributions: Department
of Energy (Energy) procurement officials reported savings of $200
million that were based on the difference between actual pension
contribution reimbursements for certain contractors at Energy-owned
and leased facilities, and the amount the department had budgeted.
This difference stemmed solely from a revision of the department's
contractor pension reimbursement policy. The revised policy states
that Energy will generally reimburse certain contractor pension plans
at the annual minimum funding level their plans are required to meet,
rather than at a predetermined funding level, which for fiscal year
2010 was higher than what was statutorily required.[Footnote 17]
However, as we previously reported, while this action may reduce the
department's costs for the current year, the department could be
required to make higher contributions in future years.[Footnote 18]
* Basing reported savings on prior or future year results: Although
agency officials told us they generally based their reported savings
on what would have been spent in fiscal year 2010 in the absence of
the initiative, in some cases agencies included savings associated
with prior or future year activities. For example, about $107 million
of HHS's reported $175 million in fiscal year 2010 savings from
improved contract negotiations reflected the full period of
performance for these contracts, including future option years.
Conversely, the Department of Justice's Federal Bureau of
Investigation reported $32 million in savings for fiscal year 2010
from an initiative reflecting actions that had previously taken place,
in fiscal years 2008 and 2009.
* Reporting savings from a hypothetical scenario: The Department of
State used a hypothetical scenario to report substantial savings of
$732 million in fiscal year 2010--70 percent of the agency's total
reported savings--and estimated another $732 million in 2011. This
reported savings was based on an unrealistic scenario wherein the
department would stop contracting for security services in Iraq and
directly hire government security personnel. This number was based
solely on a GAO estimate using fiscal year 2008 data that compared the
obligated amounts of an existing security contract to the higher
estimated annual costs department officials said they would incur if
the agency were to provide the services with its own
personnel.[Footnote 19] Department of State officials had previously
explained that although insourcing of security personnel could be an
option for Iraq, it would easily take 3 years or longer to hire and
train the thousands of security personnel that would be required to
conduct the work, and, as such, was not a realistic or possible course
of action.
Limited Use of MAX Data:
OFPP plans to continue using MAX data to track agencies' progress in
achieving acquisition savings goals for fiscal year 2011 and as a way
for agencies to share information and search out ideas for new
initiatives. However, many procurement officials told us that entering
savings data into MAX was time-intensive and cumbersome; one described
the system as ultimately more of a burden than an asset. Further, a
number of procurement officials told us that they do not use MAX for
information sharing on their savings initiatives, but generally rely
on informal communications with their peers at other agencies or use
established meeting venues such as the Chief Acquisition Officers
(CAO) Council.[Footnote 20]
A Lack of Clarity and Direction by OFPP Led to Open Interpretation of
Initiative Requirements:
In implementing the acquisition savings initiative, OMB and OFPP
guidance was broad and requirements were not always clear. In
addition, OFPP did not consistently communicate standards and
responsibilities or apply internal control procedures to the data
collection process. According to our internal control standards,
effective project management requires clearly communicated roles and
responsibilities as well as established guidance to ensure information
recorded is relevant and reliable.[Footnote 21] We identified issues
with how the initiative was implemented in several respects, as
discussed below.
Unclear Communication of Roles and Responsibilities:
We found that unclear communication between OFPP and DOD, and in some
instances even within DOD, led to a significant delay in the
department reporting its fiscal year 2010 actual savings. This
information was not entered into the MAX system until August 2011, at
least 8 months after almost all of the civilian agencies had initially
updated their data. According to senior DOD budget and acquisition
officials, since the department's estimated savings, reported in its
November 2009 savings plan, were based entirely on planned fiscal year
2010 budget reductions, it was assumed that no further action or
follow-up was needed. Further, although OFPP was aware that
responsibility for the savings initiative was with the DOD
Comptroller's office, the budget officials responsible for compiling
DOD's savings data told us that it was not until July 2011 that OFPP
first requested that their office provide updated fiscal year 2010
savings information. This communication occurred shortly after a
meeting we had with OFPP officials to discuss the final results of our
review, where we informed them that we had no information on DOD's
reported savings. In addition, we found that communication gaps within
DOD also contributed to the department's delayed reporting of savings
information to OFPP. Specifically, although DOD acquisition officials--
in addition to OFPP--referred us to the Comptroller's office for
additional insight into the department's savings initiatives during
the course of our review, the Comptroller officials we spoke with were
generally unaware of the savings initiative and unfamiliar with the
MAX system being used to track agencies' progress toward the savings
goals.
In commenting on a draft of this report, OFPP officials noted that, as
a result of lessons learned, they have recently begun working to
improve how contract savings initiatives are communicated to the
financial management community and have been conferring with OMB's
Office of Federal Financial Management in this regard.
Billions of Dollars in Baseline Reductions:
OFPP allowed agencies to propose reductions to their fiscal year 2008
spending baselines to reflect what were considered to be spending
anomalies or significant onetime spending increases. Ultimately, OFPP
allowed 11 agencies to reduce their baselines against which savings
would be measured by $34 billion--from about $523 billion to $489
billion--a reduction of more than 6 percent. This had the effect of
lowering those agencies' savings targets. For example, Energy had
proposed reducing its baseline from $24.8 billion to $6.6 billion by
removing $18.2 billion in contracts associated with the management and
operations of its national laboratories. This amount represented 73
percent of Energy's total fiscal year 2008 spending. However, OFPP
officials instructed the department to reconsider many of its proposed
reductions, and as a result Energy's adjusted baseline was set at
$11.0 billion, or 56 percent of its fiscal year 2008 spending.
Energy's baseline adjustment effectively reduced its savings target
from $868 million (3.5 percent of its original $24.8 billion baseline)
to $385 million (3.5 percent of its adjusted baseline of $11.0
billion).
We also identified some instances of questionable baseline reductions.
For example, the Department of Labor excluded $1.1 billion in
obligations under contracts associated with the Job Corps program--the
department's largest program, accounting for 61 percent of the
agency's fiscal year 2008 contract spending.[Footnote 22] Procurement
officials told us that because this program is mandated by Congress,
it was not appropriate to include these contracts in the department's
baseline as savings opportunities would be limited. However, even
though the program is mandated, there may still be opportunities to
achieve savings or improve acquisition practices associated with these
contracts. In commenting on a draft of this report, Labor acknowledged
there were such opportunities and noted that, beginning in fiscal year
2012, the department will undertake actions to convert some of these
contracts from cost-reimbursement to firm-fixed price.
Appendix II contains more details on each agency's baseline reductions
and the effect on their savings goals.
Confusion about Savings Targets:
Changes in guidance over time caused some confusion among agency
procurement officials about the actual savings targets of the
initiative. The initial guidance directed agencies to achieve savings
equal to 3.5 percent of fiscal year 2008 contract spending for 2010
and "a further 3.5 percent" for 2011. Subsequent OFPP guidance,
provided to agencies in September 2009, provided clarification that
the fiscal year 2011 savings goal was 7 percent of agencies' 2008
baseline spending. As a result, we found that agencies worked toward
different goals. Senior procurement officials from several agencies
stated they interpreted the cumulative savings target as 10.5 percent
(i.e., 3.5 percent in fiscal year 2010 and 7.0 percent in fiscal year
2011). Others, however, interpreted the cumulative savings for fiscal
years 2010 and 2011 to be 7.0 percent (i.e., 3.5 percent in fiscal
year 2010 and 3.5 percent in fiscal year 2011). To illustrate, HHS
procurement officials told us they understood the fiscal year 2011
savings goal to be 3.5 percent of their agency's adjusted fiscal year
2008 baseline and instructed staff to develop initiatives to save $205
million. If the department had used the 7 percent goal and did not
reduce its baseline, the fiscal year 2011 savings target would have
been $778 million.
Inconsistent Standards for Estimating and Verifying Reported Savings:
OFPP's broad implementation guidance provided agencies with
significant discretion as to how to identify or determine savings. As
a result, agencies often did not apply similar standards when
estimating potential savings or determining the reasonableness and
accuracy of reported savings.
* Developing savings estimates: A number of senior procurement
officials told us they delegated responsibility to develop estimates
for their savings initiatives to the specific offices responsible for
the initiatives, whereas other agencies took a more centralized
approach. For example, the Department of Veterans Affairs (VA)
delegated responsibility for estimating savings to the contracting and
program offices responsible for their specific initiatives, providing
them with OMB's guidance on how such estimates should be developed. On
the other hand, procurement officials within Energy's Office of
Procurement and Assistance Management told us they were the primary
office for developing the department's plan. A senior procurement
official at the Bureau of Prisons, within the Department of Justice,
explained that for new initiatives where there was no history to form
a savings estimate, the bureau determined it was better not to develop
an estimate rather than to derive one that was not realistic.
* Quantifying savings from acquisition workforce initiatives: We found
inconsistencies in how agencies addressed the potential savings from
acquisition workforce initiatives, such as hiring or training.
Agencies generally did not attempt to quantify potential savings from
these initiatives, due in part to difficulties in trying to measure
savings from efficiency or productivity gains. Nonetheless, some
agencies, such as the Department of Labor and the National Science
Foundation, reported savings from such initiatives that were based on
various assumptions, such as estimating productivity increases as a
result of the training.
* Verifying the accuracy of savings: Validation of reported savings
was generally delegated to the organizational unit developing the
specific initiatives, but some agencies took a different approach. For
example, senior procurement officials at the Environmental Protection
Agency and GSA told us they have tasked particular personnel who are
not involved with the individual savings initiatives with validating
the reasonableness of reported savings for each agency initiative
prior to entering the data into MAX, and Department of the Treasury
(Treasury) guidance instructs each bureau's CFO to conduct an
independent third-party validation of all reported savings. As we have
reported, validation by an independent third-party is preferred, as it
allows for an objective and unbiased assessment.[Footnote 23]
Problems in How Savings Initiatives were Entered and Categorized in
MAX:
In total, agencies initially submitted hundreds of different savings
initiatives, which OFPP entered into MAX. The level of detail of
initiatives contained in agencies' savings plans varied dramatically.
In some instances, procurement officials recorded information on
discrete savings initiatives, such as strategic sourcing of office
supplies. But in other cases, agencies aggregated their initiatives,
grouping together activities such as acquisition workforce training
and negotiating discounts on existing contracts. This required OFPP to
determine how such initiatives should be categorized in the system.
Many senior procurement officials noted that they had difficulty
locating their own initiatives in the system when OFPP requested they
provide updated information. This confusion was particularly true for
broad initiatives that encompassed multiple savings strategies. For
example, OFPP entered one of the VA's savings initiatives into MAX as
four separate line items, each under a different savings category. As
a result, duplication of effort occurred, with some agencies--such as
VA--developing their own tracking mechanisms to link their individual
agency initiatives with those in MAX. Nuclear Regulatory Commission
procurement officials added that 6 of the 16 initiatives OFPP entered
into the database for their agency were not actually their
initiatives. In addition, Treasury reported its entire savings results
in one line item in MAX, which according to agency senior procurement
officials was acceptable because they viewed the system as a tool to
report savings totals. While agencies experienced challenges
associated with using MAX, OFPP officials noted that the tool allowed
OMB to consolidate information submitted in various formats into one
standard template. But because agencies were given leeway to
categorize their initiatives to suit their own purposes, broad
categorizations decreased the usability of the information and
provided limited visibility into the extent to which specific savings
initiatives may yield results.
Future Plans for the Savings Initiative Unclear:
The extent to which this contract savings initiative will remain the
focus of attention is unclear. OFPP officials told us they expect
agencies to continue to implement ongoing savings initiatives and to
update the information the MAX system. However, agency procurement
officials told us they were unsure whether OMB's initiative would
continue in future years. In July 2011, during a White House forum on
accountability in federal contracting, OMB introduced a new initiative
requiring federal agencies to reduce spending on professional and
management services contracts by a minimum of 15 percent--or
approximately $6 billion--by the end of fiscal year 2012. OFPP
officials told us the primary focus during fiscal year 2012 will be on
meeting the goals of this new initiative because spending for these
services has grown even faster than for contracting in general and has
disproportionately been done through vehicles GAO has identified as
high-risk, such as time-and-materials contracts.
Agencies Have Slightly Decreased Use of New High-Risk Contracts, but
OFPP's Approach Limited the Full Potential of Agencies' Efforts:
Our analysis of FPDS-NG data found that in fiscal year 2010, agencies
cumulatively decreased the use of newly awarded high-risk contracts as
a share of base spending by less than 1 percent when compared to the
previous year.[Footnote 24] This result falls far short of OMB's
overall 10 percent goal. OFPP recognized that a number of agencies
fell short of meeting the risk reduction target and has now required
those agencies to achieve 10 percent reductions, as a share of base
spending, in each of the four high-risk categories for fiscal year
2011. Further, although OMB has reported reductions in the four
specific categories of high-risk contracts, our analysis produced
different results. While we obtained similar results to OMB's for
noncompetitive awards, our analysis for the remaining three high-risk
contract categories did not show similar reductions in spending. Also,
by focusing only on new high-risk contracting actions, OFPP's approach
limited the initiative's full potential. Specifically, OFPP's approach
resulted in the exclusion of hundreds of billions of dollars in
contract modifications, orders under BPAs, option years exercised, and
task orders issued under multiple-award contracts. Our prior work has
indicated that several of these areas also present opportunities to
reduce high-risk actions.
Agencies Reduced Obligations on Some Categories of New High-Risk
Contracts but Fell Short of Meeting OMB's 10 Percent Target:
While OMB has not reported the overall results of agencies' efforts to
reduce by 10 percent the share of dollars obligated through new high-
risk contracts awarded in fiscal year 2010, our analysis shows that
the 24 agencies cumulatively decreased the use of newly awarded high-
risk contracts as a share of base spending by 0.8 percent when
compared to fiscal year 2009.[Footnote 25] This change equates to a
decrease in agencies' actual spending on all newly awarded high-risk
contracts, including orders placed under single-award indefinite
delivery/indefinite quantity contracts, by about $5.2 billion.
[Footnote 26]
At various times during 2011, OMB has reported risk reduction levels
for the individual high-risk categories; our analysis, using FPDS-NG
data, produced similar results only for new noncompetitive
awards.[Footnote 27] Our analyses of the change in the share of
obligations under new contract awards receiving only one offer, and
obligations under cost-reimbursement and time-and-materials contracts,
yielded significantly different results from what was reported, as
shown in table 3.
Table 3: Change in Agencies' Obligations for New High-Risk Contracts
for Fiscal Year 2010 When Compared to Fiscal Year 2009 Obligation Data:
High-risk contract category: Noncompetitive contracts;
OFPP-reported change as a share of base spending[A] (percent): -6.0;
GAO analysis of the percentage change as a share of base spending[B]
(percent): -5.6;
GAO analysis of the difference in obligations on high-risk contracts
in fiscal year 2010 when compared to fiscal year 2009[C] (dollars in
billions): -$4.70.
High-risk contract category: Competitive solicitations receiving one
offer;
OFPP-reported change as a share of base spending[A] (percent): -11.0;
GAO analysis of the percentage change as a share of base spending[B]
(percent): 0.3;
GAO analysis of the difference in obligations on high-risk contracts
in fiscal year 2010 when compared to fiscal year 2009[C] (dollars in
billions): -$1.38.
High-risk contract category: Cost-reimbursement contracts;
OFPP-reported change as a share of base spending[A] (percent): 2.0;
GAO analysis of the percentage change as a share of base spending[B]
(percent): 9.4;
GAO analysis of the difference in obligations on high-risk contracts
in fiscal year 2010 when compared to fiscal year 2009[C] (dollars in
billions): $0.58.
High-risk contract category: Time-and-materials contracts;
OFPP-reported change as a share of base spending[A] (percent): -19.0;
GAO analysis of the percentage change as a share of base spending[B]
(percent): -15.8;
GAO analysis of the difference in obligations on high-risk contracts
in fiscal year 2010 when compared to fiscal year 2009[C] (dollars in
billions): -$1.12.
High-risk contract category: All high-risk contract categories[D];
OFPP-reported change as a share of base spending[A] (percent): Not
reported;
GAO analysis of the percentage change as a share of base spending[B]
(percent): -0.8%;
GAO analysis of the difference in obligations on high-risk contracts
in fiscal year 2010 when compared to fiscal year 2009[C] (dollars in
billions): -$5.18.
Sources: OMB and GAO analysis of FPDS-NG data.
Notes: OMB's initial guidance stated that fiscal year 2008 spending
for new awards should be used as a baseline to measure agencies'
progress, but during the second half of fiscal year 2010 OFPP
officials changed the baseline year to fiscal year 2009.
[A] OFPP's analyses used FPDS-NG obligation data that were downloaded
from the system in June 2011.
[B] GAO obtained FPDS-NG data for these analyses in June 2011. We
identified one contract, with almost $3.8 billion in obligations in
fiscal year 2009, that was incorrectly coded in FPDS-NG as having been
awarded after receiving only one offer. We adjusted this contract to
reflect the correct number of offers received and incorporated it into
our analysis.
[C] In our analysis of obligations on high-risk contracts, we
calculated the difference between high-risk obligations made in fiscal
year 2009 in each of the above categories with high-risk obligations
made in fiscal year 2010 in each of the above categories. This differs
from the other columns, where a percentage was calculated by comparing
the proportion of spending on new high-risk contracts with base
spending levels in each of the fiscal years.
[D] The FPDS-NG filtering variables used to generate data for this
category take into consideration the potential for overlap and
duplication between high-risk categories.
[End of table]
Specifically, we found that the share of new contracts awarded after
receiving only one offer remained relatively flat--with a 0.3 percent
increase from fiscal year 2009 to 2010--and cost-reimbursement
contracts increased by 9.4 percent. The variations between our
analysis and OFPP's analysis are primarily due to different
assumptions used to allocate the share of new contracts labeled as
"combination" in FPDS-NG. Prior to fiscal year 2010, contracts
containing more than one contract type (i.e., portions of the contract
were fixed-price, while other portions were cost-reimbursement or time-
and-materials) were labeled as "combination" in FPDS-NG.[Footnote 28]
We question OFPP's methodology because it appears that the proportions
used to allocate combination contracts to new cost-reimbursement and
time-and-materials contracts were based on all obligations, and not
just new awards. There are significant differences between these
ratios. For our analysis, we determined that a more appropriate
approach was to allocate the share of combination contracts to new
cost-reimbursement and time-and-materials contracts in proportions
equal to the share of new obligations in these categories. To
illustrate, OFPP's methodology assumed 23 percent ($2.3 billion) of
the fiscal year 2009 newly awarded combination contracts were cost-
reimbursement contracts, whereas our approach assumed about 9 percent
($0.9 billion) of these contracts were cost-reimbursement.[Footnote
29] We requested additional information on OFPP's rationale for the
methodology it used to allocate combination contracts, but as of
November 2011 had not received a response.
The variation in results between our and OFPP's analysis for
competitively awarded contracts with one offer received was also due
to our exclusion of one contract, with substantial obligations, that
had been incorrectly coded in FPDS-NG. Specifically, during our review
of fiscal year 2009 and 2010 obligation data, we identified delivery
orders placed under one contract administered by VA, amounting to over
$3.8 billion in obligations, that had been incorrectly coded as having
been awarded after receiving only one offer.[Footnote 30] In fact,
multiple offers had been received. This error was corrected in FPDS-NG
on October 31, 2009, just after the start of fiscal year 2010. The
timing of the correction made it appear that there had been a large
drop in the share of obligations under one-offer contracts in 2010,
when in fact the share of obligations under one-offer contracts
remained relatively stable from fiscal year 2009 to 2010. Appendix I
contains more detail on our approach to allocating the combination
contracts versus that used by OFPP, as well as our analysis of the VA
contract.
OFPP recognized that some agencies fell short of meeting fiscal year
2010 risk reduction targets and in March 2011 issued updated guidance
requiring these agencies to take the appropriate steps to achieve 10
percent reductions, as a share of base spending, in each of the four
high-risk categories for fiscal year 2011. This new target differs
from the original cumulative high-risk contract reduction goal of 10
percent, as a share of base spending, in that the new guidance now
requires a 10 percent reduction, as a share of base spending, in each
of the four high-risk contract categories. Agencies that met the
fiscal year 2010 cumulative risk reduction target are expected to
maintain those levels for fiscal year 2011. According to some
procurement officials, OFPP's revised guidance may pose additional
challenges for agencies that fell short of meeting the initial goal
because unique mission-related needs may warrant the use of certain
high-risk contracts. For example, senior officials from DOD and Energy
told us they frequently use cost-reimbursement contracts for mission-
related research and development work, which can involve substantial
uncertainties and difficulty in estimating costs with sufficient
accuracy to use a fixed-price contract.
Potential for Greater Risk Reduction Was Limited Due to OFPP's Focus
on Only New Contract Awards:
OFPP officials explained that they focused on new awards because they
felt it would be easier for agencies to focus initially--and take
corrective actions--on only new awards. This approach, while intended
to achieve a certain result, excluded a substantial portion of
government obligations under high-risk contracts--about $238 billion
in fiscal year 2010. Figure 1 shows that OFPP's methodology covered
only 14 percent of obligations and left out modifications on new high-
risk contracts and other high-risk obligations, such as orders placed
under noncompeted BPAs and the exercise of contract option years.
Figure 1: Obligations Made by the 24 CFO Act Agencies in Fiscal Year
2010 (in Billions):
[Refer to PDF for image: pie-chart]
Non-high risk obligations, $219.92: 41%;
Obligations on all other high-risk contracts, $218.59: 41%;
Obligations on newly awarded high-risk contracts (OFPP's methodology),
$75.40: 14%;
Modifications made on newly awarded high-risk contracts, $20.76: 4%.
Source: GAO analysis of FPDS-NG obligation data.
Note: We identified one contract, with over $3.8 billion in
obligations in fiscal year 2009, that was incorrectly coded in FPDS-NG
as having been awarded after receiving only one offer. We adjusted
this contract to reflect the correct number of offers received and
incorporated it into our analysis.
[End of figure]
To understand the effect of the dollars excluded from OFPP's
methodology, we used FPDS-NG data to determine the share of
obligations under high-risk contracts in fiscal year 2010 as compared
to fiscal year 2009 if modifications made on new high-risk contract
awards (the $20.76 billion in figure 1) were added to OFPP's
methodology. We conducted further analysis to determine the effect if
all high-risk obligations in fiscal year 2010 were included (a
combination of the $75.40 billion, $20.76 billion, and $218.59 billion
in figure 1). We found that the level of risk reduction changed, in
some instances dramatically, as shown in figure 2.
Figure 2: Effect of Including All High-Risk Obligations When
Determining the Change in Fiscal Year 2010 Obligations as a Share of
Base Spending from Fiscal Year 2009:
[Refer to PDF for image: data]
Contracts awarded without competition:
New high-risk awards only[A] (Using OFPP's methodology): -5.6%;
New high-risk awards including modifications to base contract: -4.6%:
All high-risk contracts with obligations in fiscal year[B]: -6.8%.
Competitive solicitations having been awarded after receiving only one
offer:
New high-risk awards only[A] (Using OFPP's methodology): 0.3%;
New high-risk awards including modifications to base contract: -1.2%:
All high-risk contracts with obligations in fiscal year[B]: 16.7%.
Cost-reimbursement contracts:
New high-risk awards only[A] (Using OFPP's methodology): 9.4%;
New high-risk awards including modifications to base contract: 11.8%:
All high-risk contracts with obligations in fiscal year[B]: 0.7%.
Time-and-materials contracts:
New high-risk awards only[A] (Using OFPP's methodology): -15.7%;
New high-risk awards including modifications to base contract: -8.0%:
All high-risk contracts with obligations in fiscal year[B]: -6.8%.
All high-risk categories[C]:
New high-risk awards only[A] (Using OFPP's methodology): -0.8%;
New high-risk awards including modifications to base contract: 0.5%:
All high-risk contracts with obligations in fiscal year[B]: 1.9%.
Source: GAO analysis of FPDS-NG obligation data.
[A] To determine the percentage of risk reduction as a share of base
spending, we used OFPP's methodology. However, the results of our
analysis differed because we took into account one contract, with over
$3.8 billion in obligations for fiscal year 2009, that was incorrectly
coded in FPDS-NG, and used a different approach to adjusting those
contracts in FPDS-NG labeled as "combination," as explained above.
[B] Included in this analysis are all new and existing high-risk
contracts and modifications with obligations during the fiscal year.
[C] Obligation data have been adjusted to take into consideration any
potential for duplication or double-counting between the four
categories of high-risk contracts.
[End of figure]
As shown in figure 2, when all high-risk obligations are considered,
the use of time-and-materials contracts as a share of base spending
only decreased to 6.8 percent rather than the 19 percent reported by
OMB (as shown in table 3). An even more dramatic change is found with
competitive solicitations awarded after receiving only one offer. When
considering all high-risk obligations as a share of base spending for
these contracts, there is an almost 17 percent increase, compared to
the 19 percent reduction reported by OMB.[Footnote 31]
By focusing solely on new high-risk contract awards, OFPP missed an
opportunity to challenge agencies to further pursue additional risk
reduction efforts, such as those identified in our prior work. We
found cases, however, where agencies did go beyond the scope of OFPP's
methodology and implemented some initiatives with potential for
reducing the share of obligations under high-risk contracts, such as
enhancing competition or reevaluating contracts during the period of
performance to determine whether a lower-risk contracting authority
could be used. These additional efforts include the following:
* Modifications to new and existing contracts for additional work: The
24 agencies obligated over $47 billion in fiscal year 2010 for
modifications to new and existing high-risk contracts where the
contracting action involved a new agreement that was outside the
original scope of work, a change to the scope of work, or additional
work that was within the existing scope of work. Some agency
acquisition savings and risk reduction plans submitted to OFPP under
this initiative determined that modifications for additional work
could be converted to a lower-risk contract or that existing
requirements could be broken into separate, competitively awarded
contracts. For example, we found one initiative submitted by NASA that
was based on an assessment, prior to modifying certain existing
contracts, of whether the requirements could be split into separate
contracts in an effort to promote full and open competition.
* Exercising option years under existing contracts: In fiscal year
2010, the 24 agencies exercised almost $28 billion in options on high-
risk contracts. Option years are a common feature of government
contracts where there is a base period of performance, generally a
year, followed by options to extend the contract term at the
government's discretion. This structure can present an opportunity for
the contracting agency to review the work performed in the previous
year and establish, for example, whether the contract requirements
could be firmer or redefined altogether so that a lower-risk
contracting authority could be used. In our 2009 report on cost-
reimbursement contracts, we recommended that OFPP take action to
revise the FAR to require contracting and program officials to
reassess requirements at appropriate times during a contract's period
of performance, such as when exercising options, and determine if the
agency's experience with the procurement provides a basis for firmer
contract pricing.[Footnote 32] OFPP, in conjunction with the Federal
Acquisition Regulatory Council, agreed with the recommendation and has
published an interim ruling amending the FAR to include, as a part of
written acquisition plans, a discussion of strategies for
transitioning to firm-fixed-price contracts to the maximum extent
practicable, either in the current period of performance when
exercising option years, or when awarding follow-on contracts.
[Footnote 33]
* Task orders on multiple-award contracts: Agencies obligated over $91
billion under multiple-award task orders in fiscal year 2010, and are
generally required to compete task orders on multiple-award contracts
among all contract holders. However, as we reported in 2010, agencies
can use a number of allowable exceptions to award orders
noncompetitively, such as when only one contractor is capable of
providing the supplies or services needed, or there is an urgent
requirement.[Footnote 34] Although many exceptions to competition are
justified, increased attention to multiple-award orders may help
increase competition.
* BPA orders: Agencies obligated $7.6 billion in fiscal year 2010 for
orders placed against existing BPAs. BPAs enable agencies to fulfill
repetitive needs for supplies and services by issuing individual
orders as the need arises, and provide an opportunity to obtain price
reductions and discounts. In our review of the agency acquisition and
risk reduction plans submitted to OFPP, we identified one agency--the
Department of Education--that fully transitioned from cost-
reimbursement BPA orders to performance-based, firm fixed-price
orders. Many other agencies identified initiatives focused on trying
to obtain better pricing or more competition under their BPAs.
However, these initiatives were not captured using OFPP's approach.
Further, in 2009, we reported that agencies did not frequently take
advantage of additional opportunities for competition or to negotiate
discounts when placing orders under GSA schedule BPAs. We made a
number of recommendations to OFPP intended to reduce the government's
risk of overpaying for goods and services under BPAs. The FAR was
revised in March 2011 to reflect our recommendations.[Footnote 35]
Agencies Are Employing a Variety of Acquisition Savings Strategies to
Achieve Long-Term Savings and Improve Outcomes:
Agencies have taken advantage of the OMB initiative to garner support
from agency leadership and employ strategies to save money, avoid
costs, reduce risk, and improve the overall efficiency and
effectiveness of the acquisition function. Many agency acquisition
officials we spoke with expressed an understanding of the stark
economic realities and budgetary limitations their agencies face and
described a number of ongoing and new initiatives that they have
undertaken with regard to contracting initiatives.
We identified from the hundreds of contracting initiatives in MAX a
subset that may show promise in yielding long-term savings from
contracting or result in more efficient acquisitions. We did not
independently validate the savings that agencies reported to OFPP, but
in a number of instances obtained additional information from the
officials responsible for the initiatives to determine the savings
methodologies they used. Although we have identified these as notable
practices, a number of these initiatives also represent common
practices that procurement officials are expected to perform as a part
of their regular job function.
While many opportunities to achieve savings occur early in the
acquisition life cycle, when acquisition plans are generally
developed, opportunities also exist during contract performance or
when preparing to exercise option years under a contract.
Improving Acquisition Planning and Preparation:
The first, and perhaps best, opportunity to reduce acquisition risk
and generate savings is in the acquisition planning phase, when
critical decisions are made that have significant implications for the
cost and overall success of an acquisition. The appropriate amount of
early planning and preparation helps to minimize risks and improve
outcomes in both product and service acquisitions.[Footnote 36] We
found examples of agency efforts to enhance acquisition planning and
preparation, as discussed below.
Table: Improving Acquisition Planning and Preparation:
Savings and risk reduction opportunities: Leadership, collaboration,
and accountability to achieve shared acquisition goals;
Description: Commitment from leadership, greater accountability, and
development of a more strategic departmentwide approach to pursing
acquisition savings initiatives.
Savings and risk reduction opportunities: Establishing well-defined
and realistic requirements;
Description: Establishing a valid need and working with program staff
to translate the need into feasible and affordable requirements.
Savings and risk reduction opportunities:
Description: Selecting contracting instruments that best serve the
needs of the acquisition.
Savings and risk reduction opportunities: Conducting spend analysis
and strategic sourcing of goods and services;
Description: Developing a knowledge base about how much is being spent
for what goods and services and determining who are the buyers and
suppliers, thereby identifying opportunities to leverage buying, save
money, and improve performance.
[End of table]
Leadership, Collaboration, and Accountability to Achieve Shared
Acquisition Goals:
Agency leadership, intra-agency collaboration, and accountability are
all essential elements to an effective acquisition process. In fact,
our prior work has found that organizations seeking to significantly
improve acquisition outcomes must begin with an established vision and
commitment from senior management.[Footnote 37] For example, in
response to Treasury's initial challenges in meeting the fiscal year
2010 savings goal, a senior-level working group consisting of the
agency's chief procurement, financial, information, and human capital
officers discussed actions to develop and implement additional savings
initiatives. According to Treasury officials, this group identified
and launched departmentwide savings opportunities and drafted
acquisition policy updates to institutionalize good practices, such as
increasing the use of strategic sourcing. The department also
increased preparation time for high-value and complex acquisitions by
instituting a new policy requiring project teams to develop
acquisition plans 18 months prior to award for acquisitions exceeding
$10 million or otherwise deemed high impact. Treasury requires bureau
program officials to forecast all future requirements, including
renewal of ongoing contracts, to ensure applicable projects are
covered in individual acquisition plans. Department officials expect
that this advanced planning and early collaboration will promote use
of lower-risk contract strategies, competition, performance based
acquisitions, and small-business participation as well as other good
business practices.
In another example, VA instituted an accountability process for
selected contracts to reduce costs, minimize risk, and provide third-
party verification of outcomes, which resulted in agency-reported
savings of about $160 million for fiscal year 2010. Specifically, VA
issued an oversight policy that included establishing a preaward
contract review process administered by seasoned acquisition
professionals, agency legal representatives, and technical advisors.
As part of the process, the teams reviewed proposed costs for certain
noncompetitive and governmentwide solicitations. Based on these
reviews, the team made recommendations that were used by the
contracting officer in negotiating fair and reasonable pricing for the
government. According to VA officials, approximately 39 percent of the
preaward review team recommendations were implemented in fiscal year
2010.
Improving Solicitations through Well-Defined and Realistic
Requirements:
As we have long reported, establishing a valid need and translating
that need into an acquisition requirement is essential for obtaining
the right outcome.[Footnote 38] Without clearly defined requirements,
an agency increases the risk that it will pay too much for the
services provided, acquire services that do not meet its needs, or
enter too quickly into a sensitive arrangement that exposes the
organization to financial, performance, or other risks. A number of
agencies we met with have emphasized better requirement-setting during
the planning process or at other appropriate times during a contract's
period of performance. For example, within the Department of Justice's
Bureau of Prisons, procurement officials worked with program staff to
develop requirements and technical specifications for a procurement of
private prison beds. Their efforts resulted in reported cost savings
of $17 million in fiscal year 2010, about 18 percent below the
previous amount paid, according to officials. Bureau contracting
officials said they took additional time to better understand
technical requirements, worked with program staff to visit existing
facilities, and considered contractor past performance in developing
new requirements. By restructuring the requirement to remove
geographical and certain construction restrictions, officials
indicated that they increased competition, received more favorable
pricing, and increased inmate occupancy.
According to officials at the Department of Housing and Urban
Development, procurement and program officials worked together to
limit costs by redefining requirements on lead-based paint abatement
contracts to put a ceiling on allowable abatement costs and ensure
that only homes with the highest potential for contamination--those
built prior to 1978--would be targeted. Procurement officials told us
that as a result of the newly defined requirements, the agency saved
$13.7 million for fiscal year 2010, and they anticipate similar
savings in future years. According to these officials, savings
resulting from this initiative were used to supplement the agency's
mortgage insurance fund, for which, as we have previously reported,
the capital ratio fell below statutory levels as the economy weakened
and home prices fell in 2008 and 2009.[Footnote 39]
Determining the Appropriate Contract Type:
Agencies can choose among different contract types to acquire products
and services. As we have reported, a primary concern is the proper
allocation of risk between the government and contractors.[Footnote
40] By choosing the appropriate contract type, procurement officials
can help to minimize risk while simultaneously achieving savings. In
one example, procurement officials at Energy's National Nuclear
Security Administration reported saving more than $40 million in
fiscal year 2010 through the administration's Contract Cost Saving
Program, an effort to convert contracts into less-risky types, such as
firm fixed-priced, and to competitively resolicit contracts previously
awarded without competition. Procurement officials told us that during
fiscal year 2010, they reviewed $1.5 billion in contracting actions to
identify risk reduction opportunities and contracts that may no longer
be needed. Contract modifications or restructures were recommended on
a case-by-case basis once the period of performance ended or as new
requirements were developed by program offices.
Conducting Spend Analysis and Strategic Sourcing of Goods and Services:
Analyzing buying patterns--referred to as spend analysis--and
strategically sourcing goods and services can provide agencies with a
better understanding of their buyers and suppliers, with the goal of
identifying opportunities to leverage buying power and improve
performance. In prior reports, we have noted that spend analysis
enabled agencies to measure the effect of changes in purchasing costs
and supplier diversity and to be better positioned to obtain more
advantageous terms and conditions by leveraging aggregate buying
power.[Footnote 41]
Almost all agencies reported some savings in fiscal year 2010
associated with the use of strategic sourcing. For example, after
conducting a spend analysis of its air ambulatory services, the Bureau
of Prisons reported savings of 30 percent, or about $1.5 million, from
negotiating a nationwide agreement rather than relying on locally
competed contracts.[Footnote 42] Bureau procurement officials said
that, because of the success of this initiative, they are evaluating
how other locally procured services could be purchased more
economically at a national level, and noted that they shared their
spend analysis information with another organization within the
Department of Justice that also uses air ambulatory services. In
another example, DHS has established a departmentwide strategic
sourcing program office, which reported saving about $347 million in
fiscal year 2010 through a portfolio of more than 300 departmentwide
contracts and by participating in GSA's Federal Strategic Sourcing
Initiative.[Footnote 43] For example, the office reported that DHS
components leveraged their buying power to save more than $60 million
by using volume software license agreements, $1.3 million on purchases
of body armor, and about $2.8 million on office supplies. In addition,
procurement officials told us DHS' strategic sourcing effort has
reduced the number of duplicative contracts between contracting
offices, and increased operational efficiency by standardizing
procurement practices throughout the department.
Identifying Savings Opportunities on Ongoing Contracts:
Agencies also reported that they sought opportunities to achieve
savings or improve acquisitions in later phases of the acquisition
life cycle, after the initial contract award. As we have previously
reported, it is also important to implement a post-contract award
process to effectively manage and assess contractor performance to
ensure that business arrangements are being properly executed and to
track progress toward acquisition goals.[Footnote 44]
Table: Reducing Costs on Ongoing Contracts and Monitoring Contract
Performance:
Savings and risk reduction opportunities: Working with contractors to
reduce operational costs;
Description: Working with contractors to share information, buy
smarter, and establish incentives that reward efficient operations.
Savings and risk reduction opportunities: Seeking additional discounts
through BPAs;
Description: Regularly seeking discounts from vendors on BPAs.
Savings and risk reduction opportunities: Renegotiating and
restructuring contracts;
Description: Identifying opportunities to renegotiate or restructure
existing contracts to achieve savings, such as by updating prices
based on current market conditions, and consolidating requirements.
[End of table]
Working with Contractors to Reduce Operational Costs:
We identified one agency that worked directly with its contractors to
achieve acquisition savings. In part based on a prior GAO
recommendation, we found that Energy is making a concerted effort to
work with its contractors to share information, leverage buying power,
and establish incentives that reward efficient operations at the
national laboratories.[Footnote 45] Our prior work has shown that when
contractors are more directly involved in planning efforts and given
adequate time to plan and prepare to accomplish their assigned tasks,
the quality of the contractor's services may improve and costs may be
lowered.[Footnote 46] Energy's senior procurement officials told us
they developed a formal process to improve collaboration and leverage
the buying power of the department's management and operating
contractors, which resulted in reported savings of more than $37
million during fiscal year 2010.[Footnote 47] Specifically, the
department created contractor purchasing teams as a means to share
information on laboratory buying habits and establish supplier
agreements that can be used by all eligible Energy contractors and
subcontractors. Department procurement officials stated that working
with the purchasing teams has improved oversight of subcontractors and
reduced contracting risks, in that over 90 percent of subcontracted
transactions are through fixed-price arrangements.
Agencies Are Seeking Additional Discounts through BPAs:
We previously reported that agencies could realize savings from
seeking discounts through GSA schedule BPAs.[Footnote 48] In
discussions with senior procurement officials, we learned of various
savings initiatives where contracting officers aggressively pursued,
and received, substantial discounts. For example, to ensure that
contracting officers at the Social Security Administration regularly
seek discounts, proposed awards over $100,000 are reviewed by a more-
senior contracting officer to determine, among other tasks, whether
discounts were sought on BPAs. As a result, procurement officials told
us they are regularly seeking discounts from vendors when acquiring
supplies and services under GSA schedule contracts and have achieved
substantial savings. For example, the agency reported receiving
discounts of more than 30 percent below the vendor's GSA schedule
prices on BPAs for printers and scanning services, which resulted in
savings of more than $180 million over the life of the contracts.
Renegotiating and Restructuring Contracts:
Many agencies reported more aggressively negotiating discounts and are
reporting significant savings as a result. For example, Department of
Education procurement officials reported saving $26.3 million in
fiscal year 2010 as a result of renegotiating prices on an existing
contract to better reflect current market conditions. Specifically, in
the middle of a 10-year technology contract, department contracting
and program officials determined that technological advances warranted
a review of contract prices for items such as computing hardware and
software. According to these officials, updated pricing benchmarks
were established and used to renegotiate the terms of the contract.
Strengthening the Acquisition Workforce:
Many agencies we met with are engaged in efforts to enhance their
acquisition workforce through hiring, retention, training, and
development of new acquisition tools and processes intended to improve
contracting officers' effectiveness and efficiency. In some instances,
senior agency procurement officials told us that recruiting and
retaining talented acquisition professionals, some with specialized
skill sets, generated significant savings and had a positive influence
on acquisition outcomes.
Table: Strengthening the Acquisition Workforce:
Savings and risk reduction opportunities: Increase use of and training
for cost and price analysts;
Description: Assess human-capital needs and augment the acquisition
workforce with experts, such as cost and price analysts, who can
improve core acquisition functions and save money.
Savings and risk reduction opportunities: Recruitment programs to
attract talented acquisition professionals;
Description: Establish programs to attract and retain professional
acquisition staff and provide on-the-job professional development
experience.
[End of table]
Expanding Use of Cost and Price Analysts:
Hiring acquisition personnel with specialized skill sets to fulfill
critical needs can lead to savings and ensure that taxpayers received
the best value for every dollar spent. As we have previously reported,
some agencies reduced the number of government cost estimators, and as
a consequence tended to rely on contractors for this task.[Footnote
49] Some agencies reported recruiting and hiring experienced cost and
price analysts, or providing such training to existing personnel,
which has helped them determine the appropriate price structure of
contracts. For example, HHS procurement officials reported saving
$60.5 million in fiscal year 2010 by hiring two cost and price
analysts to review contracts and offer contractor audit support for
the Biomedical Advanced Research and Development Authority. According
to these officials, in previous years HHS had relied on the Defense
Contract Audit Agency to conduct cost analyses and audits of
contractor accounting systems, but there were concerns about the
length of time needed to conduct the audits and the associated costs.
As a result, HHS hired two analysts with extensive experience in cost
and price analytics to provide dedicated support for the authority's
contracts. HHS officials noted that these analysts are not only more
responsive to agency needs, but are also generating additional savings
through preaward reviews and assistance with contract negotiations.
NASA procurement officials told us they focused on improving cost and
price analysis and negotiation skills for NASA's existing acquisition
workforce by developing and implementing a series of training courses
that target these skill sets. The first course provides students with
an overview of cost analysis techniques and strategies, whereas the
second course builds upon the techniques and strategies learned in the
basic course while providing the students with an in-depth
understanding of the various cost incentives available for use in
government contracts. Since its inception in June 2008, NASA has
provided 22 training courses for about 360 of its acquisition
personnel, and as a result of the training, officials reported
improvements in the quality of technical evaluations and the level of
communication between contracting and technical personnel.
Recruitment Programs to Attract Talented Acquisition Professionals:
According to OMB, the capacity of the federal government's acquisition
workforce to oversee and manage contracts has not kept pace with
increased government spending for increasingly complex purchases. For
example, federal civilian agencies' acquisition spending increased in
real terms from $80 billion to $138 billion between fiscal year 2000
and fiscal year 2008, while their acquisition workforce grew at a
considerably lower rate.[Footnote 50] Developing the acquisition
workforce has been a priority of the administration, and, as part of
this effort, agencies are implementing programs to attract and retain
skilled acquisition professionals. Recognizing the limited pool of
skilled acquisition personnel, and high turnover of new acquisition
professionals, the Department of Education developed an acquisition
fellowship program to provide specialized developmental opportunities
and on-the-job training during the first 36 months of employment. The
fellowship provides rotational assignments in two separate acquisition
offices, in which new hires are mentored by senior acquisition
officials as the new hires perform critical acquisition functions,
including market analysis, vendor outreach, and contract negotiation.
Fellows are also rotated through a program office to learn about
acquisitions from their customers' perspective. The program is
designed to build the capacity and capability of future potential
contracting officers, while enhancing interoffice cooperation and
effectiveness. According to department officials, this program has
contributed to lower attrition of new hires, reduced the costs
associated with unfilled vacancies, and helped to stabilize and better
prepare its acquisition workforce to meet the agency's future
contracting needs.
Streamlining Acquisitions through Technology and Process Improvements:
Some agencies reported developing and implementing acquisition
technology to enhance all aspects of the acquisition process. Senior
agency procurement officials told us their agencies' use of online
tools to promote competition and automate some aspects of the
contracting and acquisition process has led to substantial savings,
increased efficiencies, and in some cases, greater transparency and
accountability. These officials explained that one of the greatest
benefits derived from new acquisition technology applications is the
improved availability and flow of information.
Table: Streamlining Acquisitions through Technology and Process
Improvements:
Savings and risk reduction opportunities: Reverse auctions;
Description: Reverse auctions are online tools designed to improve
competition and drive down prices on commonly purchased products and
services.
Savings and risk reduction opportunities: Technology to promote small-
business participation;
Description: Developing new systems to reach out to small businesses,
and streamline and simplify the acquisition process to increase
participation.
Savings and risk reduction opportunities: Reengineered procurement
processes;
Description: Optimization of acquisition processes to obtain
efficiencies and reduce unnecessary duplication.
[End of table]
Using Reverse Auctions to Increase Efficiency and Enhance Competition:
Half of the agencies involved in the initiative reported using reverse
auctions as a way to improve competition and reduce prices on commonly
purchased products and services. Unlike a typical, or forward auction,
in which multiple buyers bidding against one another push the price
up, reverse auctions enable a buyer to evaluate proposals submitted
from multiple sellers in an online marketplace, in which sellers
compete against one another to provide the lowest price or highest-
value offer. After considering all offers, the buyer selects the
winning proposal, often at a reduced price. Figure 3 illustrates the
differences between a traditional online auction marketplace and the
reverse auction process, using an actual DHS purchase of information
technology (IT) equipment as an example.
Figure 3: Comparison of Forward and Reverse Auction Processes:
[Refer to PDF for image: illustration]
Traditional online auction marketplace:
Individuals sought to purchase information technology (IT) equipment,
software supplies, and support equipment.
Buyers:
Sellers:
Seller receives highest bid. Final bid: equal to or higher than
seller's starting bid.
Reverse auction online marketplace:
DHS solicited bids for IT equipment, software supplies, and support
equipment.
DHS (Buyer): DHS posts request for bids for IT equipment. A portion of
those respond.
Approved sellers: Number of sellers notified;
Sellers post competitive bids.
Buyer accepts lowest bid: Final bid: $58,100 or 10% below government
estimate.
Source: GAO analysis of DHS data.
[End of figure]
In our review of agencies' acquisition savings initiatives, we found
that a number of agencies are taking advantage of reverse auctions to
enhance competition and improve transparency in procurement
operations. For example, procurement officials at DHS reported saving
more than $50 million in fiscal year 2010 through the use of reverse
auctions, and noted that Customs and Border Protection is considered
to be the leading component within the agency regarding the use of
this tool. Having first piloted a reverse auction program in fiscal
year 2006, the component discovered that it could use the online
marketplace to achieve lower prices on a wide range of goods and
services, such as purchasing basic information technology services,
while also increasing efficiency because transactions are
automatically recorded online. Based on the success of this pilot,
reverse auctions are now given priority consideration when selecting a
technique to acquire noncomplex commodities and may be used for simple
firm fixed-price services. Customs and Border Protection reported an
average savings of approximately 10 percent on all such transactions
in fiscal year 2010.
Applying Technology to Promote Efficient Small-Business Participation:
We found examples of agencies using technology to assist in meeting
their small-business goals, while also achieving savings.[Footnote 51]
For example, the Department of Transportation's Federal Aviation
Administration launched a system to more efficiently acquire
professional, technical, and management support services from small,
women-owned, and socially and economically disadvantaged businesses
that generated $7.5 million in reported savings during fiscal year
2010. According to officials, this new system has enabled contracting
officers to more quickly and efficiently acquire services from 479
preapproved vendors that provide professional services such as systems
engineering, business administration, and computer-system support and
repair. Officials reported average price reductions of about 10
percent, in addition to shorter procurement timelines, using this
system.
Reengineering Procurement Processes:
We found that some agencies are undertaking efforts to optimize
acquisition processes by changing how products and services are
acquired in terms of business processes, organizational structures,
and roles and responsibilities. Our prior work with leading commercial
firms found that typical process-improvement initiatives were focused
on improved coordination, establishment of new processes for routine
tasks, and use of cross-functional teams made up of individuals with
various skills to ensure the right mix of knowledge.[Footnote 52] In
one example, officials at the Department of Housing and Urban
Development reported saving over $8 million during fiscal year
2011through an initiative to reduce redundancy in mortgage-
underwriting service contracts by simplifying the review process and
focusing on only the highest-risk mortgages. According to officials,
the department's previous mortgage-underwriting review process
required multiple levels of review and in some instances required
independent secondary reviews. The department replaced this approach
with a more focused, risk-based process that officials believed cut
the workload by more than half.
Conclusions:
In this era of growing fiscal constraint, it is increasingly important
that federal agencies maximize available resources to make the best
use of taxpayer dollars. While the administration's focus on savings
through contracting initiatives has achieved some success, problems
stemming from OMB's implementation have limited the potential for
greater savings and improved acquisition outcomes. The potential of
this initiative was hampered at the start with agencies' general sense
of confusion about the savings targets themselves and unclear guidance
in a number of areas. For example, by not addressing certain
ambiguities--such as whether long-planned program terminations were
allowable initiatives, and how savings under interagency contracts
should be handled, among others--some agencies' savings plans included
questionable initiatives and potentially double counting of savings.
Further, while DOD's concrete actions to end poorly performing
programs and to reduce other line items in the department's budget are
commendable, the fact remains that this particular OMB initiative was
intended to be a contract savings exercise. Taking into consideration
DOD's approach, which was strictly budget-driven and not necessarily
tied to contract savings--and which did not reflect contracting
initiatives such as strategic sourcing--and the data reliability
issues with civilian agencies' reported data in MAX, the extent to
which agencies will meet the administration's announced goal of saving
$40 billion in contracting for fiscal year 2011 is unclear. Moreover,
agencies were required to expend time and resources entering data into
MAX to comply with OMB's requests for savings information; however,
the combined lack of guidance and controls over how savings data were
entered and captured in the system limited OMB's ability to accurately
and reliably report the results of the initiative. Additionally,
because the results of the high-risk contract reduction effort--
another important undertaking for which OMB has not reported the
cumulative results--was limited to only new awards, and, by our
analysis, fell far short of the 10 percent target, many opportunities
for greater risk reduction were missed.
The issues we have identified are not insurmountable. At a minimum,
the acquisition savings initiative has generally prompted agency
leadership to emphasize the need to review procurements for cost and
risk reduction opportunities. In fact, agencies reported on hundreds
of initiatives that achieved savings, avoided costs, or were designed
to improve the efficiency and effectiveness of the acquisition
function. The examples we provided are only a subset of a much larger
effort to adopt beneficial acquisition practices and help agencies
respond to budgetary challenges and financial constraints. However,
there is uncertainty about whether the administration plans to
continue this savings initiative through fiscal year 2011, as
initially planned. In the absence of clearly communicated intent,
including how the initiative relates to others--such as OMB's recent
initiative to reduce use of professional and management support
contracts--any momentum the savings initiative has generated could be
lost.
Recommendations for Executive Action:
To build on agencies' fiscal year 2010 achievements and leverage the
momentum gained to date, we recommend that the Director of OMB take
the following two actions:
* Clarify and convey the administration's continued focus on the
acquisition savings initiative for fiscal year 2011 and beyond, and
address how it is expected to align with other initiatives, such as
OMB's new undertaking to reduce the use of professional and management
support contracts and DOD's efficiencies and other savings initiatives.
* Report no later than the time of the fiscal year 2013 budget
proposal submission to Congress on the dollar savings resulting from
the agencies' initiatives and the cumulative high-risk contract
reduction efforts for fiscal years 2010 and 2011. The results should
be reported in a manner that can be easily compared with the
administration's announced savings and high-risk reduction goals.
To enhance agency implementation of the acquisition savings and high-
risk contract reduction initiative, and to promote improved reporting
and outcomes, we recommend that the Administrator of OFPP take the
following three actions:
* Clarify guidance and criteria as to: (1) what constitutes
appropriate agency baseline reductions, (2) how savings (or cost
avoidance) initiatives are defined and reported, and (3) how actual
savings resulting from agency initiatives should be validated.
* Determine OFPP's informational needs to effectively manage and
oversee implementation of the savings initiative, including whether
MAX is the appropriate tracking and information-sharing mechanism. If
MAX continues to be the designated system, develop the appropriate
quality-control measures to improve agency-reported data.
* Revise the focus of the high-risk reduction effort to include all
high-risk contracting actions and not just new awards.
Agency Comments and Our Evaluation:
We sent copies of a draft of this report to OMB and the 24 CFO Act
agencies. A list of these agencies is provided in appendix II.
Although the report recommendations were directed to OMB and OFPP, we
welcomed comments from all participating agencies. Of the 24 agencies,
14 responded with no comments; Treasury did not respond. We received
written comments from 5 agencies (OFPP, DOD, HHS, DHS, and Labor); the
remaining agencies provided us with technical comments. A number of
the comments acknowledged the serious financial challenges the
agencies face given the current fiscal environment and described the
agencies' commitment and current efforts to adopt and expand on many
of the best practices identified in the report.
In its written comments (reproduced in appendix III), OFPP stated it
would adopt, as appropriate, our three recommendations to the
Administrator concerning the methodological and data concerns we
identified. The comments did not address whether OMB agrees with or
intends to address the two recommendations we made to the Director.
OFPP expressed concern that our report presents a narrow and
questionable picture of the results of the initiative. We disagree. We
believe our report accurately depicts the scope of agencies' efforts
under the initiative and the challenges they and OFPP faced in
developing and reporting the fiscal year 2010 savings. Our report also
discusses, in detail, the positive outcomes of this initiative,
including many actions agencies have taken to implement acquisition
savings and risk reduction strategies that show promise in yielding
long-term benefits. OFPP also stated that our report presents an
incomplete picture of the progress agencies made, particularly DOD, in
generating savings from contracting. OFPP commented that we do not
give proper credit to DOD's reported savings and states that those
savings should be counted as contract savings because the department's
initiatives are directly related to spending for the acquisition of
weapons and support systems and services. We note, however, that
because DOD's reported savings were solely based on reductions to the
department's budget, they represent a mix of contracts along with all
other program-related costs, such as DOD civilian employee pay. In
fact, almost 20 percent of the department's fiscal year 2010 savings
stem from reductions to other activities, such as recruiting, and not
from the department's procurement and research and development
accounts. DOD budget officials also told us that, with the information
they have available, it is not possible to determine the extent to
which the budget reductions stemmed from contract savings without a
labor-intensive data call for each specific initiative included in
DOD's savings plan.
Further, while acknowledging that methodological improvements are
needed so that the extent of future savings is more clearly
established, OFPP expressed concern that our report focuses more on
process than results--and that the importance of the progress agencies
have made could be obscured as a result. We disagree. As already
noted, an entire section of our report is devoted to highlighting the
promising practices agencies are undertaking to achieve long-term
savings from contracting and to reduce contracting risks. We also note
that OMB has not yet reported on the results of the initiative for
fiscal years 2010 or 2011; our recommendation that it do so was not
addressed in the agency comments. Moreover, process is important.
OFPP's ability to gauge and report on agencies' progress in meeting
the administration's savings goals were significantly affected by a
lack of clear guidance and communication, as well as other
methodological issues.
OFPP also provided technical comments, which we considered and
incorporated into the report as appropriate. We did not make changes
where OFPP suggested changes that were not consistent with the factual
language in our report.
In written comments provided by DOD (reproduced in appendix IV), the
department stated that we called into question the extent of its
participation in the initiative and noted that its savings were, "in a
number of cases," tied to specific contract actions. Because, as we
discuss in this report, we did not receive DOD's savings data until
August 2011, our initial draft report called into question DOD's full
participation in the savings initiative. Shortly after our draft was
sent to the agencies for review, we met with DOD Comptroller and
acquisition policy officials to obtain additional information on the
department's reported fiscal year 2010 savings and the nature of its
participation in the initiative. We revised our draft report to
reflect the new information and provided the revisions to DOD and OFPP
for consideration in their comments.
In written comments provided by DHS and HHS (reproduced in appendixes
V and VI, respectively), the agencies emphasized their commitment to
pursue savings opportunities and employ acquisition best practices to
curb any potential wasteful spending, as well as to promote efficiency
in the contracting process. HHS further committed to work with its
heads of contracting activity to review and resolve discrepancies with
the department's savings data contained in OMB's MAX system and to
verify its fiscal year 2010 and 2011 savings.
In written comments provided by the Department of Labor (reproduced in
appendix VII), the agency emphasized the success of the Job Corps
program and reiterated its decision to adjust its savings baseline by
excluding contract obligations under this program because these
contracts are congressionally-mandated. At the same time, however, the
department acknowledged the importance of reducing its high risk
contracts, including those in support of its Job Corps program, and
identified plans to convert some of those contracts from cost-
reimbursement to firm fixed-price contracts beginning in fiscal year
2012, as ongoing contracts require renewal.
We received additional technical comments from the Departments of
Justice, State, and VA, the Agency for International Development, and
the Environmental Protection Agency. We incorporated the comments as
appropriate. For example, based on the comments from VA, we revised
our characterization of the methodology it used to develop its savings
estimates. In its technical comments, the Department of State
disagreed with our assessment that its security contractor savings
initiative was based on a hypothetical and unrealistic scenario,
noting that the department must provide security services in Iraq
either through contractors or direct hires. As support for its
reported savings of $732 million in fiscal years 2010 and 2011, the
department cites our 2010 report, which presented a cost comparison of
using contractors versus hiring its own employees to provide these
services.[Footnote 53] We believe this is an erroneous basis for
claiming actual contract savings under the OMB initiative. The
department has contracted out for these services since 2004 and has no
plans to do otherwise. As indicated by the Under Secretary of State
for Management during a September 2009 hearing, the department could
not hire and train sufficient numbers of personnel to meet its
security requirements in the needed time frame. In its technical
comments, the Agency for International Development noted that it has
realized cost efficiencies through contracting strategies and through
rigorous contract negotiations, increasing the impact of the agency's
programs. For example, the agency stated that it has saved $136
million by purchasing generic antiretroviral drugs and has used these
savings to procure additional drugs, providing treatment to additional
patients.
We are sending copies of this report to interested congressional
committees, the Director of OMB, the Administrator of OFPP, and the
heads of the 24 agencies subject to the CFO Act. This report will also
be available at no charge on GAO's website at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report or need
additional information, please contact me at (202) 512-4841 or
huttonj@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. Staff acknowledgments are provided in appendix VIII.
Signed by:
John P. Hutton:
Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
The objectives of this review were to assess the status of the
administration's acquisition savings and high-risk contract reduction
goals and identify strategies agencies implemented that may show
potential in being leveraged across government. Accordingly, we
assessed: (1) the extent to which the Office of Management and
Budget's (OMB) initiative has achieved the intended savings from
contracting, (2) the effectiveness of OMB's initiative to reduce
obligations on new high-risk contract awards as a share of base
spending by 10 percent, and (3) the acquisition savings and risk
reduction strategies to identify those with the potential to yield
long-term savings or improve acquisition outcomes.
To determine the extent to which the OMB initiative has achieved the
intended savings from contracting, we reviewed the President's March
2009 memorandum announcing the acquisition savings initiative and
OMB's July 2009 guidance that instructed the 24 agencies subject to
the Chief Financial Officers Act to develop acquisition savings plans.
Throughout the course of the engagement, we obtained periodic updates
on the progress agencies made in attempting to meet OMB's savings
targets from the Office of Federal Procurement Policy (OFPP), which
oversaw implementation of the initiative. We also obtained periodic
reports of fiscal year 2010 and fiscal year 2011 data on agencies'
savings initiatives from OMB's MAX Information System (MAX), which
OFPP used to track and monitor agencies' savings efforts. We reviewed
the savings plans agencies submitted to OFPP and the accompanying MAX
data, and interviewed senior procurement officials at each of the 24
agencies to (1) obtain additional insight into development of the
agencies plans; (2) learn of the actions taken to identify
initiatives, determine savings, and track the progress in meeting
OMB's savings targets; (3) discuss the various savings strategies used
as well as agency-specific initiatives that either appeared to have
the potential to result in significant savings, or that we considered
could be questionable; and (4) identify challenges agency procurement
officials encountered while implementing the savings initiative.
Because agencies submitted to OFPP or entered into MAX, as of January
2011, information on over 800 savings initiatives, we did not conduct
an in-depth review of each initiative. However, we did identify a
number of initiatives that could be considered questionable or not
consistent with the objectives of the initiative when compared with
our prior work, prior OMB reports, or federal acquisition regulations.
To obtain insight on agencies' progress in meeting their savings
targets, we analyzed savings initiative data from MAX, downloaded for
us by OFPP, on four separate occasions--January 2011, February 2011,
April 2011, and July 2011. In the January and February datasets, we
identified data irregularities that prevented us from determining
agencies' actual or estimated savings. In some instances, text was
entered into fields where dollar values were requested or savings were
entered in whole dollars rather than in the format requested by OFPP.
We took steps to standardize these and other errors and removed
duplicate entries. We also identified a number of initiatives where
agencies entered in total contract obligations rather than the actual
savings resulting from the implementation of the savings initiative,
which we did not attempt to correct because the actual savings from
these initiatives were unclear. We brought these irregularities as
well as the fact that the Defense Department (DOD) had not entered any
savings data into MAX to OFPP officials' attention. This prompted the
Administrator to instruct the senior procurement executives at each
agency to review and update their agency's savings information and
provide assurances the data were accurate. We subsequently reviewed
agencies' reported data in MAX, as of April and July 2011, and
although many of the data irregularities we previously identified were
corrected, some still remained. In some instances we identified new
irregularities with the data. Beginning in December 2010, we attempted
to obtain information and additional insight into DOD's participation
in this initiative and its estimated and reported savings. The
Associate Administrator for OFPP informed us in August 2011 that the
department's fiscal year 2010 savings data had been recently entered
into MAX. Although at this point our audit work had been completed, we
subsequently conducted an assessment of the savings data and met with
senior officials from DOD's Office of the Comptroller and Defense
Procurement and Acquisition Policy to discuss specific savings
initiatives.
To assess the effectiveness of OMB's initiative to reduce obligations
on new high-risk contract awards as a share of base spending by 10
percent, we extracted and analyzed, from the Federal Procurement Data
System - Next Generation (FPDS-NG), high-risk contract actions and
dollars obligated by agencies for fiscal years 2009 and 2010. We
applied OFPP's methodology (using a set of FPDS-NG filtering
variables) to calculate the results of the high-risk reduction
initiative. To calculate the total base spending against which
subsequent reductions would be compared, OFPP's approach only included
newly awarded high-risk contracts and new orders under single award
indefinite delivery contracts. OFPP's approach excluded all
modifications, all multiple-award contracts, and "order dependent" and
"other" contract types, and compared total base spending to
noncompetitive, cost-reimbursement, time-and-material and labor-hour,
and competitively awarded contracts receiving only one offer. Since a
contract can fall into one or more of OMB's four high-risk categories,
we identified all of the contracts that were in each of the categories
and deleted the duplicates, to avoid double counting contracts. We
also performed additional analysis of each of four high-risk
categories to determine percentage reductions as a share of base
spending. Since OFPP included in its methodology obligation data on
only newly awarded high-risk contracts, we obtained additional FPDS-NG
data containing information on modifications to new awards as well as
contracting actions on existing awards. To understand the effect of
the dollars excluded from OFPP's methodology, we used FPDS-NG data to
determine: (1) the share of obligations under high-risk contracts in
fiscal year 2010 as compared to 2009 if modifications made on new
contract awards were added to OFPP's methodology in one scenario, and
(2) another scenario where all high-risk obligations made in the
fiscal year were included (including high-risk orders under blanket
purchase agreements, task orders under multiple-award contracts, and
contract option years).
In general, we found FPDS-NG data to be adequately reliable for
overall trend analysis on high-risk contracting for fiscal years 2009
and 2010 and based our analysis on the methodology used by OFPP.
However, system changes that were made to the type of contract and the
number of offers fields within FPDS-NG in the beginning of fiscal year
2010 made comparison between years problematic. For example, starting
in 2010, the type of contract field no longer allowed for a
combination (or hybrid) type of contract for new awards. As a result,
we do not know how these combination contracts are allocated between
cost-reimbursement, time-and-materials and labor-hour, and firm fixed-
price contracts for fiscal year 2009. Different assumptions produce
different results, which is primarily the reason why the results of
our analysis and OFPP's analysis were generally not similar. In order
to allow for a more reasonable comparison of fiscal year 2009 and 2010
high-risk contracting data, we assumed that the percentages of these
contracts that held for the overall population of new awards would
also hold for the combination contracts and we allocated the data
accordingly. However, because we did find that the percentages for
these types of contracts varied considerably between our three
categories of actions (base spending, modifications to base, and not
part of base) we decided to differentiate between these categories
when allocating the combination obligations by type. During this
analysis, we also found a significant error in FPDS-NG, which had been
corrected in 2010 and affected the results for competitively awarded
contracts with one offer. A Department of Veterans Affairs contract,
with over $3 billion in obligations, had been incorrectly coded in
2009 as having been awarded after receiving only one offer, when in
fact the solicitation received eight offers. When this error was
corrected in 2010, it skewed the data in FPDS-NG to show a significant
decrease in newly awarded competitive solicitations receiving only one
offer, when in actuality, obligations made on such contracts were
relatively flat between the two years.
We conducted interviews with agency procurement-policy representatives
and heads of contracting activities and reviewed acquisition savings
plans to gain additional insight into the various high-risk reduction
actions agencies pursued as part of this initiative. We also met with
OFPP officials and reviewed pertinent documents to understand the
process by which OFPP gauged the success of agencies' high-risk
reduction efforts. Where appropriate, we supplemented our analysis
with reviews of prior GAO reports and recent statutory and regulatory
actions pertaining to high-risk contracting authorities and
competition.
To identify agencies' acquisition savings and risk reduction
strategies that show promise in yielding long-term savings or
improving acquisitions outcomes, we reviewed prior GAO reports and
associated recommendations, met with OFPP and agency procurement
officials, analyzed agency acquisition savings plans and OFPP progress
reports on the acquisition savings initiatives, and reviewed reported
savings data in MAX that were provided by OFPP. Using a
nongeneralizable sampling approach, we selected 27 out of more than
800 initiatives contained in MAX, as of January 2011, for further
analysis. To select these initiatives, we identified a set of
beneficial acquisition practices that (1) our past work had
identified, (2) had yielded agency-reported savings for fiscal year
2010, or (3) could have widespread application across the government.
Furthermore, the initiatives we selected across multiple agencies
included a variety of savings strategies, such as acquisition
planning, requirements setting, workforce development, contract
negotiation practices, strategic approaches to leveraging buying
power, efforts to reduce reliance on high-risk contracts, use of
technology to improve efficiency, reengineering of ineffective
business processes, and others. We asked agency officials about the
development, implementation, and tracking of the selected initiatives,
and assessed their responses. As part of our review, we also
identified other notable examples of good procurement practices based
on our conversations with procurement officials and our analysis of
information contained in the MAX system. We incorporated information
from these initiatives and activities as appropriate.
We conducted this performance audit from December 2010 to November
2011 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Summary of the 24 CFO Act Agencies' Unadjusted and
Adjusted Savings Baselines and Associated Fiscal Year 2010 Savings
Targets:
Chief Financial Officers (CFO) Act Agency: Agency for International
Development;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $3,660.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $3,660.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $128.10;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$128.10;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: $256.20;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $256.20.
Chief Financial Officers (CFO) Act Agency: Department of Agriculture;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $5,312.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $2,470.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -53.5%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $185.92;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$86.45;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: $371.84;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $172.90.
Chief Financial Officers (CFO) Act Agency: Department of Commerce;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $2,344.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $1,127.50;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -51.9%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $82.04;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$39.46;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: $164.08;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $78.93.
Chief Financial Officers (CFO) Act Agency: Department of Defense;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $393,582.60;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $393,582.60;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $13,775.39;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$13,775.39;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 27,550.78;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $27,550.78.
Chief Financial Officers (CFO) Act Agency: Department of Education;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $1,375.60;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $1,375.60;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $48.15;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$48.15;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 96.29;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $96.29.
Chief Financial Officers (CFO) Act Agency: Department of Energy;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $24,800.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $10,954.96;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -55.8%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $868.00;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$383.42;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 1,736.00;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $766.85.
Chief Financial Officers (CFO) Act Agency: Department of Health and
Human Services;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $11,111.80;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $5,883.60;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -47.1%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $388.91;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$205.93;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 777.83;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $411.85.
Chief Financial Officers (CFO) Act Agency: Department of Homeland
Security;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $14,150.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $13,336.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -5.8%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $495.25;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$466.76;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 990.50;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $933.52.
Chief Financial Officers (CFO) Act Agency: Department of Housing and
Urban Development;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $883.90;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $883.90;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $30.94;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$30.94;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 61.87;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $61.87.
Chief Financial Officers (CFO) Act Agency: Department of Justice;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $6,059.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $5,303.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -12.5%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $212.07;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$185.61;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 424.13;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $371.21.
Chief Financial Officers (CFO) Act Agency: Department of Labor;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $1,800.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $700.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -61.1%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $63.00;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$24.50;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 126.00;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $49.00.
Chief Financial Officers (CFO) Act Agency: Department of State;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $5,587.90;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $5,587.90;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $195.58;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$195.58;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 391.15;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $391.15.
Chief Financial Officers (CFO) Act Agency: Department of the Interior;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $3,734.60;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $2,676.10;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -28.3%;
[Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $130.71;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$93.66;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 261.42;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $187.33.
Chief Financial Officers (CFO) Act Agency: Department of the Treasury;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $4,526.60;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $4,526.60;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $158.43;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$158.43;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 316.86;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $316.86.
Chief Financial Officers (CFO) Act Agency: Department of
Transportation;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $4,115.90;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $4,115.90;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $144.06;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$144.06;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 288.11;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $288.11.
Chief Financial Officers (CFO) Act Agency: Department of Veterans
Affairs;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $14,589.50;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $13,886.60;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -4.8%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $510.63;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$486.03;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 1,021.27;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $972.06.
Chief Financial Officers (CFO) Act Agency: Environmental Protection
Agency;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $1,360.00;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $1,360.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $47.60;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$47.60;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 95.20;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $95.20.
Chief Financial Officers (CFO) Act Agency: General Services
Administration;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $7,716.10;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $1,600.00;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -79.3%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $270.06;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$56.00;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 540.13;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $112.00.
Chief Financial Officers (CFO) Act Agency: National Aeronautics and
Space Administration;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $15,000.40;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $15,000.40;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $525.01;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$525.01;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 1,050.03;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $1,050.03.
Chief Financial Officers (CFO) Act Agency: National Science Foundation;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $379.20;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $379.20;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $13.27;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$13.27;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 26.54;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $26.54.
Chief Financial Officers (CFO) Act Agency: Nuclear Regulatory
Commission;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $175.50;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $150.40;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -14.3%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $6.14;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$5.26;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 12.29;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $10.53.
Chief Financial Officers (CFO) Act Agency: Office of Personnel
Management;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $111.40;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $111.40;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $3.90;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$3.90;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 7.80;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $7.80.
Chief Financial Officers (CFO) Act Agency: Small Business
Administration;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $67.50;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $67.50;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $2.36;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$2.36;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 4.73;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $4.73.
Chief Financial Officers (CFO) Act Agency: Social Security
Administration;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $746.60;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $746.60;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): [Empty];
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $26.13;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$26.13;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: 52.26;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $52.26.
Chief Financial Officers (CFO) Act Agency: Total;
Fiscal year 2008 baseline spending: Unadjusted baseline spending
(millions of dollars): $$523,190;
Fiscal year 2008 baseline spending: Agency adjusted baseline (millions
of dollars): $$489,486;
Fiscal year 2008 baseline spending: GAO analysis of the percent
reduction in agencies' baseline (percent): -6.4%;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: (3.5% of baseline): Unadjusted baseline
(millions of dollars): $$18,311.65;
GAO analysis of Office of Federal Procurement Policy's (OFPP) fiscal
year 2010 savings targets: Adjusted baseline (millions of dollars):
$$17,132.00;
GAO analysis of OFPP's fiscal year 2011 savings targets: (7.0% of
baseline): Unadjusted baseline (millions of dollars: $36,623.31;
GAO analysis of OFPP's fiscal year 2011 savings targets: Adjusted
baseline (millions of dollars): $$34,264.00.
Sources: GAO analysis of OFPP and agency data.
Note: OFPP allowed agencies to reduce baseline spending levels to
account for spending anomalies or onetime spikes in spending.
[End of table]
[End of section]
Appendix III: Comments from the Office of Management and Budget:
Note: Page numbers in the draft report may differ from those in this
report.
Executive Office Of The President:
Office Of Management And Budget:
Office of Federal Procurement Policy:
Washington, D.C. 20503:
October 28. 2011:
Mr. John P. Hutton:
Director:
Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, NW, Room 4440A:
Washington, DC 20548:
Dear Mr. Hutton:
Thank you for the opportunity to offer views on the Government
Accountability Office (GAO) draft report entitled Federal Contracting:
OMB's Acquisition Savings Initiative Had Results but Improvements
Needed" (GA0-12-57). The report discusses the Administration's
initiative to reduce contract spending and reduce high-risk
contracting in Fiscal Year (FY) 2010.
We appreciate the recognition given by GAO to the many exampLes of
success in saving money and improving acquisition outcomes. We also
appreciate the recommendations GAO offers for achieving even greater
fiscal responsibility in savings and risk reduction efforts going
forward. As explained below, however, we are concerned that the report
presents a narrow and questionable picture of results.
The draft report made five recommendations to OMB. Two Of these
recommendations are directed to the Director and relate to OMB's
continued focus on acquisition savings (conveying the Administration's
continued focus on savings and reporting on such savings with the FY
2013 Budget). The remaining three recommendations are directed to the
Administrator for Federal Procurement Policy and include clarifying
guidance, determining informational needs, and expanding the high-risk
reduction efforts beyond new awards. We will be adopting GAO's
recommendations, where appropriate, in particular to address the
methodological and recording concerns that were raised by GAO.
Our initiatives to strengthen buying practices have been changed by
the way the Federal Government does business. As a part of this
effort, for the first time, every agency subject to the Chief
Financial Officers Act (which collectively account for 99 percent of
annual contract spending) put together a plan to outline its
strategies for reducing contract costs. In some cases, these
strategies involved commitments to buy less - for example, by
divesting the agency of contracts that were no longer necessary or
affordable. In other cases, the strategies entailed buying smarter in
accordance with best practices previously identified by GAO, for
example, by leveraging the government's buying power to negotiate
better prices for everyday needs, and using electronic reverse
auctions where vendors bid prices down to win an agency's work.
Concerted efforts to use more fiscally responsible buying practices
have produced results. In FY 2010, contract spending decreased for the
first time in 13 years. According to data in the Federal Procurement
Data System (FPDS), agencies spent approximately $15 billion less than
they did in FY 2009 and $80 billion less than they would have spent
had contract spending continued to grow at the same rate it had under
toe previous Administration. While Final FY 2011 FPDS spending figures
have not yet been validated by agencies, we expect contract spending
in FY 2011 to remain near the lower level seen in FY 2009. To build on
this progress, we have directed agencies to focus greater attention in
FY 2012 on reducing spending on management support services, such as
engineering and program management, where spending has grown even
faster that for contracting in general and where spending has
disproportionally occurred through vehicles that GAO has flagged as
problematic, such as time-and-material contracts.
In our view, the draft GAO report presents an incomplete picture of
the progress made in reducing spending on contracts, because GAO does
not give proper credit to the Department of Defense's (DOD) reported
acquisition savings of more than $18 billion. On page 9 of the draft
report, the GAO states that "it is not possible to accurately
determine the results of this initiative, in part because ... DOD's
identified savings ... were solely attributed to budget reductions
included in the Department's broader, on-going effort to reduce
spending by $520 billion through 2015, and not necessarily tied to
contract savings." With disagree with the implication in GAO's
statements that spending less on contracts is not a contract savings.
Buying less — such as by ending, de-scoping, or restructuring
contracts that are missing program goals, duplicative of other
acquisitions, or no longer required by the mission - is the most basic
form of contract savings and requires our agency officials to make the
very types of hard choices that taxpayers should expect of a fiscally
responsible government. As GAO notes (on page 9 of the draft report).
PMB supported DOD's "budget-based approach" because its reported
savings would be "quantifiable and verifiable." To the extent that GAO
is questioning if DOD's identified savings include funding that falls
outside of spending on acquisition, DOD's Office of the Comptroller
has confirmed that the specific initiatives in its reported savings
are directly related to spending for the acquisition of weapons and
support systems and services.
In addition, it is our view that there is no basis for GAO's apparent
assumption that agency decisions to spend less on contracts were
outside the scope of OMB's initiative. OMB's July 2009 savings plan
guidance expressly calls out "savings through reductions in spending"
as a prime example of the type of savings that may be credited towards
savings targets. See Attachment 1 of M-09-25, Improving Government
Acquisition, available at [hyperlink,
http://www/whitehouse.gov/sites/default/files/omb/assets/memoranda_fy200
9/m-09-25.pdf]. We fully agree with GAO that agencies, including DOD,
must continue to give high priority to smarter buying practices, such
as strategic sourcing. In this regard, the Office of Federal
Procurement Policy has been working closely with all major buying
agencies, including DOD, to increase the use of strategic sourcing as
a savings tool. Important as those "buying smarter" efforts are,
however, they should not take away from what GAO acknowledges are
"concrete" and "commendable" actions by DOD to reduce spending on its
contracts. For all of these reasons, DOD's contract savings of more
than $18 billion should be recognized towards achievement of the
Administration's FY 2010 savings goal of $19 billion.
Overall, we are concerned that the4 GAO report focuses more on process
rather then results. In particular, the report highlights
methodological issues related to measuring the amount of the savings
that agencies have achieved. We agree that it is important to improve
in this area, and we are committed to improving the methodology going
forward, so that the extent of future savings is more clearly
established. We are troubled, though, that, notwithstanding legitimate
concerns about how to measure the progress made over the past two
years, there is a risk that those concerns could obscure the
importance of the very real progress made. The fact is that the
Administration's efforts in agencies across the Executive Branch led
to the government actually decreasing contracting spending last year
for the first time in 13 years, and that unprecedented progress is not
in question.
Again: we appreciate GAO's recognition of the many agency initiatives
to buy less and buy smarter. As mentioned above, as we move forward,
we will be adopting GAO's recommendations, where appropriate, in
particular to address the methodological and recording concerns that
GAO focused on. We welcome GAO's review as we move forward to expand
and deepen the contract savings initiative reported on in this report.
Sincerely,
Signed by:
Daniel I. Gordon:
Administrator:
[End of section]
Appendix IV: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
November 1, 2011:
Mr. John P. Hutton:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Hutton:
Thank you for the opportunity to comment on GAO Draft Report,
GAO-12-57, "Federal Contracting: OMB's Acquisition Savings Initiative
Had Results, but Improvements Needed", dated November 2011. The draft
report did not contain specific recommendations for the Department of
Defense, although it called into question the extent of the
Department's participation in the initiative.
The Department participated vigorously in the Office of Management and
Budget (OMB) Office of Federal Procurement Policy (OFPP) savings
initiative. We generated contract savings in complete compliance with
OFPP guidance on savings. As requested by OFPP we have documented
those savings in MAX that were a result of our commitment to obtain
greater efficiency and productivity in defense spending. In a number
of cases our savings were tied to specific contract actions that
included terminating and restructuring programs that were performing
poorly or were determined to be in excess of real-world needs.
The Department worked in close coordination with OMB/OFPP in
developing its Saving Plan in response to OMB memorandum M-09-25,
Improving Government Acquisition. The Department's plan was provided
to OFPP by the Director, Defense Procurement and Acquisition Policy,
and was prepared in coordination with the Under Secretary of Defense
(Comptroller).
We have continued to pursue contract and program savings initiatives,
the latest being the on-going implementation of AT&L's Better Buying
Power Initiatives which will result in billions of dollars of savings
to the taxpayers.
Sincerely,
Signed by:
Shay D. Assad:
Director, Defense Pricing:
[End of section]
Appendix V: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
September 26, 2011:
John P. Hutton:
Director, Acquisition and Sourcing Management:
441 G Street, NW:
U.S. Government Accountability Office:
Washington, DC 20548:
Re: Draft Report GAO-12-57, "Federal Contracting: OMB's Acquisition
Savings Initiative Had Some Results, but Improvement Needed"
Dear Mr. Hutton:
Thank you for the opportunity to review and comment on this draft
report. The U.S. Department of Homeland Security (DHS) appreciates the
U.S. Government Accountability Office's (GAO's) work in planning and
conducting its review and issuing this report.
The Department is pleased to note the report's positive acknowledgment
that the DHS Strategic Sourcing Program Office has identified savings
of about $347 million in Fiscal Year 2010 through a portfolio of more
than 300 Department-wide contracts and participation in the General
Service Administration's Federal Strategic Sourcing Initiative.
Although the report does not contain any recommendations specifically
directed at DHS, the Department remains committed to employing a
variety of acquisition strategies to curb any potential wasteful
spending and reduce inefficient contracting practices.
Again, thank you for the opportunity to review and comment on this
draft report. We look forward to working with you on future Homeland
Security issues.
Sincerely,
Signed by:
Jim H. Crumpacker:
Director:
Departmental GAO-OIG Liaison Office:
[End of section]
Appendix VI: Comments from the Department of Health and Human Services:
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
September 22, 2011:
John P. Hutton, Director:
Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street NW:
Washington, DC 20548:
Dear Mr. Hutton:
Attached are comments on the U.S. Government Accountability Office's
(GAO) draft report entitled, "Federal Contracting: OMB's Acquisition
Savings Initiative Had Some Results, but Improvements Needed" (GAO-12-
57).
The Department appreciates the opportunity to review this report prior
to publication.
Sincerely,
Signed by:
Jim R. Esquea:
Assistant Secretary for Legislation:
Attachment:
[End of letter]
General Comments Of The Department Of Health And Human Services (HHS)
On The Government Accountability Offices's (GAO) Draft Report
Entitled, "Federal Contracting: OMB's Acquisition Savings Initiative
Had Some Results, But Improvements Needed" (GAO-12-57):
The Department appreciates the opportunity to review and comment on
this draft report.
HHS takes the OMB acquisition savings initiative seriously.
Information in this report will be used to identify "best practices"
in planning for, achieving, and reporting on acquisition savings. The
Department, working with the Heads of Contracting Activity, will
review and resolve any discrepancies in the data currently posted in
the MAX system, verifying accurate reporting for Fiscal Years 2010 and
2011.
[End of section]
Appendix VII: Comments from the Department of Labor:
Note: Page and footnote numbers in the draft report may differ from
those in this report.
U.S. Department of Labor:
Office of the Assistant Secretary for Administration and Management:
Washington, D.C. 20210:
Reply to the Attention of:
September 26 2011:
Mr. John P. Hutton:
Director:
Acquisition and Sourcing Management:
Government Accountability Office:
441 G St. NW:
Washington, D.C. 20548:
Dear Mr. Hutton:
Thank you for the opportunity to review and comment on the Draft
Government Accountability Office (GAO) Report on Federal Contracting:
OMB's Acquisition Savings Initiative Had Some Results, but
Improvements Needed (GAO-12-57) (GAO Report). Though the Department of
Labor (DOL) has no comments on the Report's recommendations, we are
concerned with the reference to our Job Corps program on page 17 of
the Draft Report:
Billions of Dollars in Baseline Reductions [starts on page 16]:
OFPP allowed agencies to propose reductions to their,fiscal year 2008
spending baselines to reflect what were considered to be spending
anomalies or significant onetime spending increases. Ultimately, OFPP
allowed 11 agencies to reduce their baselines against which savings
would be measured by $34 billion—from about $523 billion to $489
billion— a reduction of more than 6 percent. This had the effect of
lowering the agencies' savings targets. For example, Energy had
proposed reducing its baseline from $24.8 billion to $6.6 billion by
removing $18.2 billion in contracts associated with the management and
operations of its national laboratories. This amount represented 73
percent of Energy's total fiscal year 2008 spending. However, OFPP
officials instructed the department to reconsider many of its proposed
reductions, and as a result Energy's adjusted baseline was set at
$11.0 billion, or 56 percent of its fiscal year 2008 spending.
Energy's baseline adjustment effectively reduced the savings target
from $868 million (3.5 percent of its original $24.8 billion baseline)
to 3385 million (3.5 percent of its adjusted baseline of $11.0
billion).
We also identified some instances of questionable baseline reductions.
For example, the Department of Labor excluded $1.1 billion in
obligations under contracts associated with the Job Corps program--the
department's largest program, accounting for 61 percent of the
agency's fiscal year 2008 contract spending., Procurement officials
told us that, because this program is mandated by Congress, it was not
appropriate to include these contracts in the department's baseline,
as savings opportunities would be limited. However, although the
program is mandated, there could still be opportunities to achieve
savings or improve acquisition practices associated with these
contracts. Appendix II contains more details on each agency's baseline
reductions and the effect on their savings goals.
Footnote 21- Established as part of the Economic Opportunity Act of
1964, Pub. L. No. 88-452, Job Corps is the nation's largest
residential, educational, and career technical-training program for
disadvantaged youths. Job Corps is the most expensive federal fob-
training program, with the cost of each training slot averaging about
$34,060.
The Employment and Training Administration's (ETA) Office of Contracts
Management (OCM), Office of Job Corps (OJC), and Office of Financial
and Administrative Management (OFAM) have reviewed the Office of
Management and Budget's (OMB) response to the Department's request to
have the Job Corps Operational contracts excluded from the
Department's baseline contract dollars. ETA maintains its position
that the Job Corps regional operation contracts (Job Corps centers,
Outreach and Admissions (OA), and Career Transition Services (CTS))
should not be included in the DOL pool of contracts to meet the
Department's reduction targets due to the fact that these contracts
are Congressionally mandated under the Workforce Investment Act, 29
U.S.C. § 2881-2901.
Notwithstanding this congressional mandate, ETA proposes to take steps
to reduce the level of high risk (cost reimbursement) contracts within
the Job Corps program. Currently, 100% of Job Corps Regional Operation
Contracts are cost reimbursement contracts. Over time, ETA will reduce
risk by gradually converting OA and CTS contracts from cost
reimbursement to firm-fixed price contracts. OCM, in consultation with
OJC, will identify the OA/CTS contracts scheduled for re-procurement
during FY12 that will be awarded as firm fixed price. This deliberate
process will allow time to review the impact of the transition from
cost reimbursement to firm fixed price on: 1) performance; 2) funding,
as firm-fixed price contracts must be funded in their entirety upon
award and Job Corps receives quarterly apportionments of its program
funds; and 3) Federal staff workload. The impact of these variables
will be fully evaluated prior to completely transitioning OA and/or
CTS contracts.
Finally, with respect to footnote 21 in the GAO Report, I would like
to emphasize the fact that Job Corps is one of the most successful
vocational programs that the federal government is currently funding.
For example:
* The annual number of high school diplomas attained by students has
tripled since 2001. In Program Year 2009, 20,048 students attaining a
high school diploma or GED.
* In PY 2009, over 31,681 students, completed career and technical
training programs in 11 high growth, high demand industry sectors
encompassing more than 100 occupational offerings.
* In PY 2009, 76% of graduates were placed in employment or the
military, or enrolled in postsecondary education.
* In PY 2009, Job Corps graduates entered the workforce with an
average hourly wage of $9.22.
Should you have any questions regarding the Department's response,
please contact Mr. Al Stewart, Procurement Executive, at
Stewart.Milton@dol.gov or 202-693-4028.
Sincerely,
Signed by:
T. Michael Kerr:
Chief Acquisition Officer:
[End of section]
Appendix VIII: GAO Contact and Staff Acknowledgments:
GAO Contact:
John P. Hutton, (202) 512-4841 or huttonj@gao.gov:
Staff Acknowledgments:
Other individuals making key contributions to this report include
Michele Mackin, Assistant Director; Christopher Kunitz; Peter F. Beck;
Antoine Clark; Lisa L. Fisher; Julia M. Kennon; Jean McSween; Charles
W. Perdue; Roxanna T. Sun; and Alyssa B. Weir.
[End of section]
Related GAO Products:
Streamlining Government: Key Practices from Select Efficiency
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http://www.gao.gov/products/GAO-11-908]. Washington, D.C.: September
30, 2011.
Acquisition Planning: Opportunities to Build Strong Foundations for
Better Services Contracts. [hyperlink,
http://www.gao.gov/products/GAO-11-672]. Washington, D.C.: August 9,
2011.
Federal Contracting: Opportunities Exist to Increase Competition and
Assess Reasons When Only One Offer Is Received. [hyperlink,
http://www.gao.gov/products/GAO-10-833]. Washington, D.C.: July 26,
2010.
Contracting Strategies: Data and Oversight Problems Hamper
Opportunities to Leverage Value of Interagency and Enterprisewide
Contracts. [hyperlink, http://www.gao.gov/products/GAO-10-367].
Washington, D.C.: April 29, 2010.
The Office of Management and Budget's Acquisition Workforce
Development Strategic Plan for Civilian Agencies. [hyperlink,
http://www.gao.gov/products/GAO-10-459R]. Washington, D.C.: April 23,
2010.
Defense Acquisitions: Managing Risk to Achieve Better Outcomes.
[hyperlink, http://www.gao.gov/products/GAO-10-374T]. Washington,
D.C.: January 20, 2010.
Civilian Agencies' Development and Implementation of Insourcing
Guidelines. [hyperlink, http://www.gao.gov/products/GAO-10-58R].
Washington, D.C.: October 6, 2009.
Contract Management: Extent of Federal Spending under Cost-
Reimbursement Contracts Unclear and Key Controls Not Always Used.
[hyperlink, http://www.gao.gov/products/GAO-09-921]. Washington, D.C.:
September 30, 2009.
Contract Management: Agencies Are Not Maximizing Opportunities for
Competition or Savings under Blanket Purchase Agreements despite
Significant Increase in Usage. [hyperlink,
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9, 2009.
Defense Contracting: Army Case Study Delineates Concerns with Use of
Contractors as Contract Specialists. [hyperlink,
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2008.
Defense Contracting: Additional Personal Conflict of Interest
Safeguards Needed for Certain DOD Contractor Employees. [hyperlink,
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2008.
Best Practices: Increased Focus on Requirements and Oversight Needed
to Improve DOD's Acquisition Environment and Weapon System Quality.
[hyperlink, http://www.gao.gov/products/GAO-08-294]. Washington, D.C.:
February 1, 2008.
Defense Acquisitions: DOD's Increased Reliance on Service Contractors
Exacerbates Long-standing Challenges. [hyperlink,
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23, 2008.
Federal Acquisition: Oversight Plan Needed to Help Implement
Acquisition Advisory Panel Recommendations. [hyperlink,
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20, 2007.
Department of Homeland Security: Ongoing Challenges in Creating an
Effective Acquisition Organization. [hyperlink,
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2007.
Defense Acquisitions: Role of Lead Systems Integrator on Future Combat
Systems Program Poses Oversight Challenges. [hyperlink,
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2007.
Defense Acquisitions: Improved Management and Oversight Needed to
Better Control DOD's Acquisition of Services. [hyperlink,
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2007.
Defense Acquisitions: Tailored Approach Needed to Improve Service
Acquisition Outcomes. [hyperlink,
http://www.gao.gov/products/GAO-07-20]. Washington, D.C.: November 9,
2006.
DOD Acquisitions: Contracting for Better Outcomes. [hyperlink,
http://www.gao.gov/products/GAO-06-800T]. Washington, D.C.: September
7, 2006.
Best Practices: Using Spend Analysis to Help Agencies Take a More
Strategic Approach to Procurement. [hyperlink,
http://www.gao.gov/products/GAO-04-870]. Washington D.C.: September
16, 2004.
Best Practices: Improved Knowledge of DOD Service Contracts Could
Reveal Significant Savings. [hyperlink,
http://www.gao.gov/products/GAO-03-661]. Washington, D.C.: June 9,
2003.
[End of section]
Footnotes:
[1] MAX is used to support the federal budget process. The system has
the capability to collect, validate, analyze, model, and publish
information relating to governmentwide management and budgeting
activities and can also be used as an information sharing and
communication portal between government organizations.
[2] Appendix II contains a listing of the 24 agencies that are subject
to the CFO Act.
[3] In this report, we use the term "time-and-materials" to refer to
both time-and-materials and labor-hour contracts, as labor-hour
contracts differ from the former only in that the contractor does not
supply materials.
[4] OFPP developed its 11 categories of savings strategies as a means
to help facilitate the sharing of information contained in each
agency's savings plan, and as a way by which OFPP could quickly find
agencies that have activities in a particular area.
[5] GAO, Best Practices: Using Spend Analysis to Help Agencies Take a
More Strategic Approach to Procurement, [hyperlink,
http://www.gao.gov/products/GAO-04-870] (Washington, D.C.: Sept. 16,
2004); Best Practices: Improved Knowledge of DOD Service Contracts
Could Reveal Significant Savings, [hyperlink,
http://www.gao.gov/products/GAO-03-661] (Washington, D.C.: June 9,
2003); Best Practices: Taking a Strategic Approach Could Improve DOD's
Acquisition of Services, [hyperlink,
http://www.gao.gov/products/GAO-02-230] (Washington, D.C.: Jan. 18,
2002).
[6] GAO, Contract Management: Guidance Needed to Promote Competition
for Defense Task Orders, [hyperlink,
http://www.gao.gov/products/GAO-04-874] (Washington, D.C.: July 30,
2004).
[7] GAO, Interagency Contracting: Franchise Funds Provide Convenience,
but Value to DOD is Not Demonstrated, [hyperlink,
http://www.gao.gov/products/GAO-05-456] (Washington, D.C.: July 29,
2005); High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-05-207] (Washington, D.C.: January
2005); Contract Management: Problems with DOD's and Interior's Orders
to Support Military Operations, [hyperlink,
http://www.gao.gov/products/GAO-05-201] (Washington, D.C.: Apr. 29,
2005).
[8] GAO, Civilian Agencies' Development and Implementation of
Insourcing Guidelines, [hyperlink,
http://www.gao.gov/products/GAO-10-58R] (Washington, D.C.: Oct. 6,
2009); Defense Contracting: Army Case Study Delineates Concerns with
Use of Contractors as Contract Specialists, [hyperlink,
http://www.gao.gov/products/GAO-08-360] (Washington, D.C.: Mar. 26,
2008); Defense Contracting: Additional Personal Conflict of Interest
Safeguards Needed for Certain DOD Contractor Employees, [hyperlink,
http://www.gao.gov/products/GAO-08-169] (Washington, D.C.: Mar. 7,
2008); Defense Acquisitions: DOD's Increased Reliance on Service
Contractors Exacerbates Long-standing Challenges, [hyperlink,
http://www.gao.gov/products/GAO-08-621T] (Washington, D.C.: Jan. 23,
2008); Defense Acquisitions: Role of Lead Systems Integrator on Future
Combat Systems Program Poses Oversight Challenges, [hyperlink,
http://www.gao.gov/products/GAO-07-380] (Washington, D.C.: June 6,
2007).
[9] GAO, Streamlining Government: Key Practices from Select Efficiency
Initiatives Should Be Shared Governmentwide, [hyperlink,
http://www.gao.gov/products/GAO-11-908] (Washington, D.C.: Sept. 30,
2011).
[10] In May 2010, the Secretary of Defense directed DOD to undertake a
departmentwide initiative to assess how the department is staffed,
organized, and operated with the goal of reducing excess overhead
costs and reinvesting these savings in sustaining DOD's current force
structure and modernizing its weapons portfolio. As part of its fiscal
year 2012 budget request, DOD outlined projected savings of $178
billion to be realized over a 5 year period beginning in fiscal year
2012. According to DOD, these savings include projected savings of
about $154 billion from the Secretary's initiative and about $24
billion from other sources. GAO has ongoing work in this area.
[11] The Future Years Defense Program is a submission to Congress that
provides information on DOD's current and planned outyear budget
requests. Our analysis also found that DOD's reported savings in MAX
were $18.6 billion, almost $630 million less than what the
Comptroller's office had reported to OFPP. An OFPP official explained
that he had requested that DOD remove seven initiatives from the data
because the savings associated with those initiatives were the result
of reductions to recruiting and retention bonuses, and did not involve
contracting.
[12] GAO, Defense Acquisitions: Assessments of Selected Weapon
Programs, [hyperlink, http://www.gao.gov/products/GAO-09-326SP]
(Washington, D.C.: Mar. 30, 2009).
[13] We do not know the full extent to which there are overstatements
in MAX, as we did not conduct a comprehensive review on all
initiatives that were entered into the system.
[14] Because we did not conduct a comprehensive review of every
initiative with reported savings, these examples are illustrative and
do not constitute the potential universe of questionable savings.
[15] In January 2004, the President's Vision for Space Exploration
directed NASA to retire the Space Shuttle by the end of the decade,
upon completion of key deliverables of the International Space Station.
[16] Contract closeout is the process that includes ensuring that all
contract administration actions have been fully and satisfactorily
accomplished and the contract file documented accordingly. According
to the Federal Acquisition Regulation (FAR), the process must ensure
that administrative matters are completed, including deobligating any
remaining excess funds. See FAR 4.804.
[17] Energy will generally reimburse contractors at Energy-owned and
leased facilities the annual minimum required pension contribution
those contractors must make under the Employee Retirement Income
Security Act of 1974, as amended. Department of Energy Order 350.1,
Contractor Human Resource Management Programs (Chg. 3, Feb. 23, 2010).
The Pension Protection Act of 2006 established benefit restrictions
for private-sector single-employer plans, including those at Energy-
owned facilities, that apply if a plan's funding level falls below
certain specified thresholds. Pub. L. No. 109-280, § 103 (codified as
amended at 29 U.S.C. § 1056(g)).
[18] GAO, Department of Energy: Progress Made Overseeing the Costs of
Contractor Postretirement Benefits, but Additional Actions Could Help
Address Challenges, [hyperlink,
http://www.gao.gov/products/GAO-11-378] (Washington, D.C.: Apr. 29,
2011).
[19] GAO, Warfighter Support: A Cost Comparison of Using State
Department Employees versus Contractors for Security Services in Iraq,
[hyperlink, http://www.gao.gov/products/GAO-10-266R] (Washington,
D.C.: Mar. 4, 2010). Task orders under the Department of State's
Worldwide Personal Protective Services contract were first issued in
2004 for provision of personal protective services in Iraq.
[20] The CAO Council is an interagency forum used for monitoring and
improving the federal acquisition system. Among other activities, the
council provides assistance with multiagency projects and innovative
initiatives, and helps further competition and efficiency in the
acquisition process. The council is chaired by the Deputy Director for
Management at OMB. Members include the OFPP Administrator; the Under
Secretary of Defense for Acquisition, Technology, and Logistics; the
civilian agency CAOs; senior procurement executives of the military
departments; and other designated senior agency officials.
[21] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999). Internal control is a major part of
managing an organization. It comprises the plans, methods, and
procedures used to meet missions, goals, and objectives and, in doing
so, supports performance-based management. Internal control also
serves as the first line of defense in safeguarding assets and
preventing and detecting errors and fraud.
[22] Established as part of the Economic Opportunity Act of 1964, Pub.
L. No. 88-452, Job Corps is the nation's largest residential,
educational, and career technical-training program for disadvantaged
youths.
[23] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[24] The percent reduction was calculated by determining the
percentage change in the share of base spending (the percent) from
2009 to 2010. In fiscal year 2009, obligations made on new high-risk
contracts accounted for 40.58 percent of obligations on all new
awards, whereas in fiscal year 2010, obligations on new high-risk
contracts accounted for 40.27 percent of obligations on all new
awards. Although OMB's initial guidance stated that fiscal year 2008
spending for new awards should be used as a baseline to measure
agencies' progress, during the second half of fiscal year 2010, OFPP
officials changed the baseline year to fiscal year 2009. FPDS-NG data
show that base spending in fiscal year 2008 was more than base
spending in fiscal year 2009. OFPP officials indicated the change was
done in an attempt to better capture trends with more current data.
Our analysis was based on new awards, including single-award
indefinite delivery/indefinite quantity contracts, as that was the
focus of this initiative.
[25] Our analysis of the share of obligations under new high-risk
contracts was conducted using OFPP's methodology and FPDS-NG filtering
variables. Additional information on the methodology is in appendix I.
[26] These contracts provide for an indefinite quantity, within stated
limits, of supplies or services during a fixed period, through the
issuance of orders for individual requirements. FAR 16.504. A single-
award indefinite delivery/indefinite quantity contract results from a
solicitation where only one contractor is awarded the contract.
[27] OMB first reported the results of agencies' risk reduction
efforts for noncompetitive contract awards and competitive awards
receiving only one offer in February 2011. Results of agencies'
efforts to reduce time-and-materials contracts were first reported in
June 2011, and the results of efforts to reduce use of cost-
reimbursement contracts were reported in July 2011.
[28] See GAO, Contract Management: Extent of Federal Spending under
Cost-Reimbursement Contracts Unclear and Key Controls Not Always Used,
[hyperlink, http://www.gao.gov/products/GAO-09-921] (Washington, D.C.:
Sept. 30, 2009). In that report, we noted that obligations under
contracts coded as "combination" had increased significantly. We
analyzed fiscal year 2008 FPDS-NG obligations coded as combination
contracts and found that about a quarter of the obligations went to
contracts that had 50 percent or more cost-reimbursement type
obligations. We recommended that OFPP reconcile the conflicting
instructions in the FPDS-NG user manual for coding combination
contracts versus coding based on the preponderance of contract type.
Subsequently, effective in fiscal year 2010, the combination contract
type was removed from FPDS-NG for new awards.
[29] OFPP's methodology for allocating newly awarded combination
contracts to cost-reimbursement contracts was based on a previous GAO
analysis of all fiscal year 2008 obligations made under combination
contracts. See [hyperlink, http://www.gao.gov/products/GAO-09-921]. As
discussed above, however, we questioned the use of this approach for
the high risk reduction effort and requested additional information
from OFPP.
[30] We have previously reported on FPDS-NG errors regarding the
extent of competition, including obligations coded as having received
one offer. See GAO, Federal Contracting: Opportunities Exist to
Increase Competition and Assess Reasons When Only One Offer Is
Received, [hyperlink, http://www.gao.gov/products/GAO-10-833]
(Washington, D.C.: July 26, 2010), where we reported that about 18
percent of the 107 contracts and orders we reviewed had been
incorrectly coded.
[31] DOD accounted for 60 percent of all high-risk obligations made on
competitive solicitations having been awarded after receiving only one
offer. Recognizing the need for increased and effective competition,
the Director of Defense Procurement and Acquisition Policy issued
guidance in April 2011 to address this issue. Specifically, the
guidance instructs that unless an exception applies or a waiver is
granted, contracting officers are to cancel and resolicit competitive
procurements for at least 30 days where, after being advertised for 30
days or less, only one offer was received. In addition, in instances
where only one offer is received after 30 days of advertisement, the
guidance states that contracting officers shall use proposal analysis
techniques in accordance with FAR 15.404-1 to make a determination
that the offer was fair and reasonable.
[32] [hyperlink, http://www.gao.gov/products/GAO-09-921].
[33] Proper Use and Management of Cost-Reimbursement Contracts, 76
Fed. Reg. 14,543 (Mar. 16, 2011). See also, FAR 7.105(b)(5)(iv).
[34] [hyperlink, http://www.gao.gov/products/GAO-10-833]. Also see FAR
16.505(b)(2). Other reasons for allowing a noncompetitive task order
are that the requirement is a logical follow-on, or the order is
needed to meet a minimum guarantee.
[35] See [hyperlink, http://www.gao.gov/products/GAO-10-833] and
[hyperlink, http://www.gao.gov/products/GAO-09-792]. See also, FAR,
Subpart 8.4-Federal Supply Schedules.
[36] See GAO, Acquisition Planning: Opportunities to Build Strong
Foundations for Better Services Contracts, [hyperlink,
http://www.gao.gov/products/GAO-11-672] (Washington, D.C.: Aug. 9,
2011) and Defense Acquisitions: Managing Risk to Achieve Better
Outcomes, [hyperlink, http://www.gao.gov/products/GAO-10-374T]
(Washington, D.C.: Jan. 20, 2010).
[37] See GAO, Defense Acquisitions: Tailored Approach Needed to
Improve Service Acquisition Outcomes, [hyperlink,
http://www.gao.gov/products/GAO-07-20] (Washington, D.C.: Nov. 9,
2006); Department of Homeland Security: Ongoing Challenges in Creating
an Effective Acquisition Organization, [hyperlink,
http://www.gao.gov/products/GAO-07-948T] (Washington, D.C.: June 7,
2007).
[38] See [hyperlink, http://www.gao.gov/products/GAO-07-20]; GAO,
Federal Acquisition: Oversight Plan Needed to Help Implement
Acquisition Advisory Panel Recommendations, GAO-08-160 (Washington,
D.C.: Dec. 20, 2007).
[39] See GAO, Mortgage Financing: Financial Condition of FHA's Mutual
Mortgage Insurance Fund, [hyperlink,
http://www.gao.gov/products/GAO-10-1066T] (Washington, D.C.: Sept. 23,
2010).
[40] See [hyperlink, http://www.gao.gov/products/GAO-10-374T].
[41] See GAO, Best Practices: Improved Knowledge of DOD Service
Contracts Could Reveal Significant Savings [hyperlink,
http://www.gao.gov/products/GAO-03-661] (Washington, D.C.: June 9,
2003) and [hyperlink, http://www.gao.gov/products/GAO-04-870].
[42] The bureau uses air ambulatory services to provide transportation
of prisoners to hospitals.
[43] Since 2006, OMB has encouraged agencies to coordinate their buys
through Federal Strategic Sourcing Initiative interagency procurement
vehicles awarded by GSA. Current contracts under this initiative
include express and ground domestic delivery services, wireless
telecommunications expense-management services, and office supplies.
[44] See [hyperlink, http://www.gao.gov/products/GAO-07-20].
[45] See GAO, Department of Energy: Additional Opportunities Exist for
Reducing Laboratory Contractors' Support Costs, [hyperlink,
http://www.gao.gov/products/GAO-05-897] (Washington, D.C.: Sept. 9,
2005). Specifically, GAO recommended that Energy take actions to
improve cost data among laboratories and reduce support costs by
ensuring that Energy laboratories adopt important cost saving
initiatives. These recommendations are further supported by FAR
guidance, which suggests that collaborative efforts might be
advantageous in larger-scale research and development contracts and
projects (FAR 9.602(b)).
[46] See GAO, Defense Acquisitions: Improved Management and Oversight
Needed to Better Control DOD's Acquisition of Services, [hyperlink,
http://www.gao.gov/products/GAO-07-832T] (Washington, D.C.: May 10,
2007).
[47] Management and Operating contracts are agreements under which the
government contracts for the operation, maintenance, or support of a
government-owned or controlled research, development, special
production or testing establishment devoted to one or more major
programs. Infrastructures supported under these agreements include
production facilities for nuclear materials, research facilities, and
national laboratories. Department of Energy Acquisition Regulation,
Subpart 917.6 and Part 970.
[48] See [hyperlink, http://www.gao.gov/products/GAO-10-833] and
[hyperlink, http://www.gao.gov/products/GAO-09-792].
[49] See [hyperlink, http://www.gao.gov/products/GAO-07-832T].
[50] See GAO, The Office of Management and Budget's Acquisition
Workforce Development Strategic Plan for Civilian Agencies,
[hyperlink, http://www.gao.gov/products/GAO-10-459R] (Washington,
D.C.: Apr. 23, 2010).
[51] The federal government has an annual goal of awarding not less
than 23 percent of prime contract dollars to small businesses.
[52] [hyperlink, http://www.gao.gov/products/GAO-07-20].
[53] [hyperlink, http://www.gao.gov/products/GAO-10-266R].
[End of section]
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